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TMI Blog2022 (5) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... using a lesser quantity of hydrochloric acid, Rules 6(1) and 6(2) of the CCR would not come into play. The issue whether the LPG is byproduct or otherwise has become academic and need not required to be decide. Appeal dismissed. - R/TAX APPEAL NO. 219 of 2022 - - - Dated:- 5-5-2022 - HONOURABLE MR. JUSTICE J.B. PARDIWALA AND HONOURABLE MS. JUSTICE NISHA M. THAKORE Mr. Nikunt K Raval(5558) for the Appellant(s) No. 1 Mr. Mihir Joshi, Mr. Nisarng Desai, Mr. Vipin Jain, Ms. Shilpa Belani, Mr. Ramnath Prabhu, Ms. Dimple Gohil For Gandhi Gandhi Law Associates (12275) for the Opponent(s) No. 1 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 35G of the Central Excise Act, 1944, is at the instance of the Revenue and is directed against the order passed by the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad dated 11.10.2021 in Excise Appeals Nos.12204 of 2019 and 12205 of 2019 respectively. The Revenue has proposed the following questions of law for the consideration of this Court: (i) Whether the order passed by the Hon'ble Tribunal, wherein, the Hon'ble Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing LPG under End Use exemption Notification to PSU Oil companies under Domestic LPG subsidy Scheme. 3. The respondent is engaged in the manufacture of excisable goods like Motor Spirit, High Speed Diesel, LPG etc. It is the case of the appellant that the respondent has been availing credit of duty paid on the input and capital goods and input service in terms of the provisions of the CENVAT Credit Rules, 2004. The refund claim was made in respect of the CENVAT Credit Reversed / Paid under Rule 6(3) of the CENVAT Credit Rules, 2004 for the period between April, 2015 and March, 2016 on removal of the LPG under the Domestic Subsidy Scheme as under: i) The amount reversed / paid on inputs attributable to LPG in terms of Rule 6(3A)(c)(i) Rs.2,20,32,262/-. Total: Rs.8,31,32,211/ii) Amount reversed / paid on input services as per formula prescribed under rule 6(3A)(c) (iii) after final adjustment of credit in terms of rule 6(3A) (f) Rs.6,10,99,949/-. 4. The Deputy Commissioner, CGST Central Excise, Division - 1, Jamnagar vide order dated 22.02.2018 rejected the refund claim. The operative part of the order passed by the Deputy Commissioner reads thus: ORDER:: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court found that in case a Bench considering the question of law has either ignored a Constitution Bench judgment or a judgment of the Larger Bench either of the Apex Court or the High Court, the decision rendered by a Bench has to be held per incuriam. (Emphasis supplied) 7.6 The appellant has further contended that for applicability of Rule 6(2) and Rule 6(3) of CCR, 2004, there should be two different final products in which common inputs are used. I find that the Hon'ble Madras High Court in the case of DCW Ltd. reported as 2011 (274) ELT 183 (Mad.) has held that for the provisions of Rule 57CC(1) to apply, there should be one final product which is dutiable and another final product which is exempted from payment of duty or chargeable to Nil rate of duty. I further find that the appeal filed by the department against the said judgment of the Hon'ble Madras High Court in the case of DCW Limited has been dismissed by the Hon'ble Supreme Court in a common judgment in the case of Hindustan Zine Limited reported as 2014 (303) ELT 321 (SC). I find that the factual matrix of the case on hand is similar to that of case of DCW Limited. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at credit reversed under Rule 6(3A) of CCR, 2004 and the impugned orders rejecting refund claims are not correct, legal proper and hence liable to be set aside. 9. In view of above, I set aside the impugned orders and allow the appeals filed by the appellant. 9.1 The appeals filed by the appellant are disposed off as above. Sd/- (KUMAR SANTOSH) PRINCIPAL COMMISSIONER (APPEALS) By RPAD To, M/s. Reliance Industries Limited, Village Meghpar, Padana, Gagva, District Jamnagar-361140 6. The Revenue being dissatisfied with the order passed by the Commissioner went in Appeal before the Tribunal. The Tribunal dismissed the Appeals holding as under: 4.5 The LPG generated during the course of manufacture of motor sprit MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil etc. is dutiable right from the stage of receipt of input and input services till the completion of manufacture of LPG. Therefore, during that stage availment of Cenvat Credit is absolutely in conformation to Cenvat Credit Rules, 2004. In the process or refining crude oil to obtain value added finished goods namely motor sprit (MS), High Speed Dies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged to acidulation vats with the help of conveyors. Each vat is filled with pre-determined quantity of bine chips and then soaked with Hydrochloric Acid. The bones contain mineral matter like Phosphate Salts. The Hydrochloric Acid leaches out the phosphates forming Mono Calcium Phosphate. The phosphate solution commonly known as Mother Liquor is pumped out of the acidulation vats into precipitation tanks where lime solution is added which reacts with Mono Calcium Phosphate converting it into Di-Calcium Phosphate Insofar as manufacture of Gelatin is concerned, after removal of Mother Liquor the demineralised bones are hydraulically transported to the washing section and thereafter processed further to manufacture Gelatin. The above manufacturing process shows that while soaking the bone chips in Hydrochloric Acid a waste product: viz, Mother Liquor ipso facto comes into existence. It is not as if there is a deliberate attempt on the part of the manufacturer to manufacture the Mother Liquor which emerges as a by-product during the course of manufacture of Gelatin. Moreover, it is not as if a particular quantity of Hydrochloric acid is used for the manufacture of Gelatin and a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt. consumption and inventory of input. 10. In the facts of the present case, it is not as if by using a smaller quantity of input Hydrochloric Acid, the respondent could have averted the emergence of Mother Liquor. In other words, in the technology utilized by the respondent for the manufacture of Gelatin, the emergence of Mother Liquor was inevitable. Hence, while it is no doubt correct to say that Hydrochloric Acid has been used in or in relation to manufacture of Mother Liquor, the identical quantity of the same goods has simultaneously been used in the manufacture of Gelatin. The emergence of Mother Liquor during the course of manufacture of Gelatin, therefore, by itself is not a ground to invoke the provisions of Rule 6 of the Rules. 12. On behalf of the appellant it has been submitted that common input Hydrochloric Acid was used in the manufacture of both Gelatin as well as Di-Calcium Phosphate hence, in the light of the provisions of Rule 6(2) of the Cervat Credit Rules, 2002, the respondent was required to maintain separate accounts for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of motor sprit (MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil etc. does not get reduced that same entire quantity of input and input services has been used in manufacture of dutiable goods even though the LPG is generated in the stream of entire manufacture process. The Cenvat credit of only such quantity of input and input services to be denied which is not used in the manufacture dutiable goods but in the present case there is no dispute that the entire quantity of input and input services has been used for manufacture of dutiable goods therefore even though the LPG arising in the course of manufacture only because of that it cannot be said that there is reduction in the quantity of input and input services used in the manufacture dutiable goods. 7. In such circumstances referred to above, the Revenue is here before this Court with the present Tax Appeal. 8. We have heard Mr. Nikunt Raval, the learned senior standing counsel appearing for the Revenue and Mr. Mihir Joshi, the learned senior counsel appearing for the respondent. 9. The contentions of the Respondent which found acceptance with the Tribunal are the following - a. That LPG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d law that the requirement of reversal under Rule 6 of CCR does not apply to by-products. 10. The Revenue has, in the present appeal, primarily contended that the Tribunal has erred in holding that LPG emerges as a byproduct and hence the provisions of Rule 6 of CCR have no application. It has also contended that the judgment in the case of Sterling Gelatin is not applicable to the facts of the present case. 11. It is submitted that the Tribunal has rightly held that LPG is a by-product, as it arises inevitably in the process of manufacture of Motor Spirit, High Speed Diesel, Aviation Turbine Fuel etc., as well as by virtue of the fact that it does not have Equal Economic Importance vis- -vis the value added final products. However, assuming for the sake of argument that LPG is not a by-product, even then, there being no dispute in the present appeal on the other findings arrived at by the Tribunal, the appeal filed by the Revenue thus deserves to be dismissed. 12. Insofar as the challenge in the Revenue s appeal to the inapplicability of the judgment in the case of Sterling Gelatin is concerned, it is submitted that there is nothing in the appeal to disprove the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elatin, the question of maintaining separate accounts or of paying a percentage of the total price of the exempted goods would not arise. In the peculiar facts of the present case, sub-rule (1) of Rule 6, itself would not come into play inasmuch the manufacturer does not deliberately use any quantity of the inputs, viz. Hydrochloric Acid for manufacturing Mother Liquor, the entire Hydrochloric Acid is used in the manufacture of Gelatin. Thus, when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input. 10. In the facts of the present case, it is not as if by using a smaller quantity of input Hydrochloric Acid, the respondent could have averted the emergence of Mother Liquor. In other words, in the technology utilized by the respondent for the manufacture of Gelatin, the emergence of Mother Liquor was inevitable. . 12. On behalf of the appellant it has been submitted that common input Hydrochloric Acid was used in the manufacture of both Gelatin as well as Di-Calcium Phosphate hence, in the light of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with DMT to produce polyester fibre. It is not possible to use a lesser quantum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fibre. Thus, the quantity of ethylene glycol required to produce a certain quantum of polyester fibre is determined by the chemical reaction. It may be mentioned herein that it is not as if the appellants have used excess ethylene glycol wantedly to produce the methanol. It is clear that the appellants are not engaged in the production of methanol but in the production of polyester fibre. That position is undisputed. Therefore, it appears that the Tribunal erred when it held that the appellants were not entitled to a part of the credit of duty since ethylene glycol when it interacts with DMT also gives rise to methanol. This construction would frustrate the object of exemption if something which evidently arises out of the interaction. Even prior to amendment to notification No. 201/79 with effect from 11-4-87, the only situation where the credit of the duty paid on the inputs could be denied was only where the final products were wholly exempt from the duty of excise or chargeable to nil rate of duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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