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TMI Blog2022 (11) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... that of the Tribunal and held that This Court, held that since the assessee could not have manufactured gelatin (dutiable final product) using a lesser quantity of hydrochloric acid, Rules 6(1) and 6(2) of the CCR would not come into play. In these circumstances, the principle stands established that rule 6 of CENVAT Credit Rules, 2004 is inoperable ab initio in such clearances - demand set aside - appeal allowed - decided in favor of appellant. - EXCISE APPEAL NO: 1498 OF 2012 WITH CROSS OBJECTION NO: 150 OF 2012 - A/85909/2022 - Dated:- 26-9-2022 - HON BLE MR C J MATHEW, MEMBER (TECHNICAL) AND HON BLE MR AJAY SHARMA, MEMBER (JUDICIAL) Shri Ramnath Prabhu and Shri Anil Balani, Advocates for the appellant Shri Dhirendra Kumar, Joint Commissioner (AR) for the respondent ORDER PER: C J MATHEW This appeal lies against order-in-appeal no. BK/1/LTU/MUM/2012 dated 13th July 2012 of Commissioner of Central Excise Service Tax (Appeals), LTU, Mumbai holding that the appellant, M/s Reliance Industries Ltd, was ineligible for refund of amounts that had, inadvertently, been reversed in CENVAT credit account under rule 6(3A) of CENVAT Credit Rules, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tin reported in 2011 (270) ELT 200 (Guj.) wherein in the issue before the Hon ble Court was that whether the assessee was required to pay an amount of 8%/10% of the value of exempted goods under Rule 6 (3) (b) of the CCR, as one of the inputs namely Hydrochloric acid was used in the manufacture of dutiable goods (Gelatin) as well as for manufacture of exempted goods Dicalcium Phosphate and the assessee was not maintaining separate account under rule 6(2) of CCR,2004. The Hon‟ble Gujarat High Court after examining the provision of Cenvat scheme and the argument that the assessee therein could not have manufactured Gelatin using a lesser quantity of Hydrochloric acid held that rule 6 (1) of the CCR itself would not come into play. The relevant observation of Hon ble High Court is reproduced below:- 6. The undisputed facts of the case are that for the purpose of manufacture of Gelatin, cleared bone chips are charged to acidulation vats with the help of conveyors. Each vat is filled with pre-determined quantity of bone chips and then soaked with Hydrochloric Acid. The bones contain mineral matter like Phosphate Salts. The Hydrochloric Acid leaches out the phosphates formin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tin without Mother Liquor coming into existence. Thus, when the entire quantity of input viz. Hydrochloric Acid is used in the manufacture of the final product being Gelatin which is a dutiable product, the mere fact that a by-product emerges during the process would not bring the by-product within the ambit of Rule 6 of the Rules so as to call for maintaining separate accounts in respect of the same. When the entire quantity of input is used in the manufacture of Gelatin, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio the above judgment which directly applicable to the facts of the present case for the reason that in the aforesaid judgment the appellant intended to manufacture gelatin as the main product and exempted goods i.e. Dicalcium Phosphate generated unavoidably in the course of manufacture of gelatin same quantum of input and input services used for manufacture of gelatin. In the present case the entire quantity of input and input services was used for manufacture of dutiable products namely motor sprit (MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil etc. only because of generation of LPG the quantum of input and input services used for manufacture 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the manufacture of ethane and methane, the identical quantity of the same goods has simultaneously been used in the manufacture of ethylene and propylene. The emergence of ethane and methane is, therefore, by itself is not a ground to deny the benefit of the exemption notification. 30. We have heard the learned counsel for the parties at length and perused the judgments cited at the Bar. The Tribunal s finding that the ethylene and propylene used as refrigerant has been used in or in relation to the manufacture of the same goods. The inevitable and automatic emergence of ethane and methane, therefore, by itself is no ground for denying the exemption contained in the notification. The Tribunal came to the categoric finding that the respondent could not have manufactured ethylene and propylene without manufacturing its by-products ethane and methane. The Tribunal held that in any technology the emergence of ethane and methane was inevitable and hence while it is no doubt correct to say that the ethylene and propylene have been used in or in relation to the manufacture of ethane and methane, the identical quantity of the same goods has simultaneous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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