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TMI Blog2025 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... f Cenvat credit of the duty paid on the Copper Concentrate, Refrigerant gas used in the manufacture of oxygen and Vanadium Pentoxide used as catalyst for conversion of Sulphur Dioxide to Sulphur Trioxide. Further sulphuric acid is manufactured by the appellant from the Sulphur dioxide gases emanating during the smelting of the Copper concentrate. It is matter of record that Copper concentrate Catalyst and Oxygen are the common inputs used for manufacture of goods cleared on payment of duty such as Copper Cathodes, Continuous Cast Copper rods, Sulphuric Acid etc as well as in the manufacture of exempted goods. The department is of the view that certain inputs like Business Auxiliary Service, Business Support Service, Cargo Handling service, C&F Agent service, Customs House Agent services, General Insurance services, Manpower Recruitment or Supply Agency Service, Transport of goods by Road services, Works Contract services etc. are also common services for manufacture of both Copper products as well as Di-ammonium Phosphate (DAP). The department on the basis of above contention that certain inputs as well as input services have been used for exempted final products and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisable Goods) Rules, 2001 read with Sr. 128 of Notification No. 12/2012-CE dated 17.03.2012; and (c) captively consumed in the manufacture of phosphoric acid at Phosphoric Acid Plant within the factory. Thus it can be seen from the above that a part of Sulphuric acid arising in the sulphuric acid plant is used for manufacturing Phosphoric acid. In Phosphoric Acid Plant the Sulphuric acid is reacted with rock phosphate to get Phosphoric acid. The Phosphoric acid which emerges from the above plant is captively consumed in Di-ammonium Phosphate Plant. Phosphoric acid is reacted with ammonia to get the Di-Ammonium Phosphate (DAP for short). He submits that the appellant have cleared DAP as a fertilizer classified under Central Excise Tariff sub heading 3105 3000 on payment of duty at the rate of 1% ad valorem in terms of Serial No. 128 of Notification No. 12/2012-CE dated 17.03.2012. 2.2 The learned advocate has further submitted that appellant have been issued various show cause notices proposing to demand reversal of 5%/ 6%/ 8%/ 10% as applicable during the relevant period on the value of exempted goods under Rule 6(3)(i) of the Cenvat Credit Rules, 2004. The details of the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness Support Service, CHA service, C&F Agent service, General Insurance services, Manpower Recruitment or Supply Agency Service, Works Contract services etc. for both for manufacture of excisable as well as exempted goods. 2.3 It is relevant to mention here that the learned Adjudicating Authority i.e. Commissioner of Central Excise, Bharuch vide order-in-original BHR- EXCUS-000-COM-001-024-16-17 dated 27.05.2016 dropped the proceedings initiated in the show cause notices demanding reversal under Rule 6(3)(i) of Cenvat Credit Rules, 2004 in relation to clearance of sulphuric acid, covering the period up to July 2015. The learned Adjudicating Authority while deciding various show cause notices by order dated 27.05.2016 has relied upon the judgment of Hon'ble Supreme Court in the appellant's own case reported in 2014 (303) ELT 321 (SC). 2.4 Learned advocate has submitted that learned Commissioner vide the impugned orders-in-original dated 29.12.2016 and 30.01.2019, the details are above at table of this order, have been confirmed as period covered in these two impugned orders-in-original is post 01.03.2015 when the definition of non-excisable goods have been amended by the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e called "non- excisable goods". The Explanation to Rule 6 relied upon by the Department is irrelevant in the present case. The relevant Explanation is extracted below:- "Rule 6. Obligation of a manufacturer or producer of final products and a provider of output service - (1) The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2): Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002 on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 1 - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2 - Value of non-excisable goods for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted goods. Further it also appears that certain inputs services like Business Auxiliary Services, Business Support services, Cargo Handling services, Clearing and Forwarding agent services, Courier, Customs House Agent services, General Insurance services, Manpower Recruitment and Supply agent services, Transport of goods by road, Works Contract services etc. are also common for manufacture of both Copper Products as well as DAP. 8. The assessee has contended that Sulphuric Acid is an unintended by-product, However, it appears that manufacture of DAP from Sulphuric Acid is Excisable product for which assessee has made conscious effort. From the records, it is quite clear that the process of smelting of copper core for manufacture of copper concentrate and Copper rods does not have any relationship to the manufacture of DAP. Manufacture of DAP is having totally different facility and is not even remotely connected to the manufacture of Copper concentrate or copper rods. Hence, it appears that manufacture of DAP is conscious effort and is intended excisable product. It is also a matter of record that some quantity of Sulphuric Acid is sold by the assessee to the manufacture of Ure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring and Forwarding Agent Services, Courier, Customs House Agent services, General Insurance services, Manpower Recruitment & Supply Agency services, Transport of goods by road (GTA), Works Contract services etc. are also common services for manufacture of both Copper Products as well as DAP. The assessee has contended that Sulphuric Acid is an unintended by-product, however, it appeared that manufacture of DAP from Sulphuric Acid is excisable product for which assessee has made conscious effort. From the records, it is quite clear that the process of smelting of copper core for manufacture of copper concentrate and Copper rods does not have any relationship to the manufacture of DAP. Manufacture of DAP is having totally different facility and is not even remotely connected to the manufacture of Copper concentrate or copper rods. It is also a matter of record that some quantity of Sulphuric Acid is sold by the assessee to the manufacturer of Urea or Phosphate. Hence, captive consumption of Sulphuric Acid is totally an independent activity from that of manufacture of Copper Concentrate. Therefore, input services like Business Auxiliary Services, Business Support Services, Cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.11.2023 reported under -2023 (11) TMI 1070 -CESTAT Ahmedabad has held as follows:- "11. We have carefully considered the submissions made by both the sides and perused the records. We find that in the present disputed matter department has relied upon Explanation (1) introduced w.e.f. 01.03.2015 and Board circular dtd. 25.04.2016 to demand the amount in terms of Rule 6(3) of Cenvat Credit Rules, 2004. Whereas the main argument of the appellant with regard to the challenge of the Circular dated 25-4- 2016 is that despite the insertion of Explanation 1 with effect from 1-3-2015, the Legislature has not removed the basis on which the judgment of the Hon'ble Supreme Court was pronounced, and therefore despite the amendment treating certain non- excisable goods as exempted goods or final products, Sulphuric Acid would not be treated to be an exempted goods for the purpose of reversal of credit of input/input services in terms of Rule 6 of the Cenvat Credit Rules, 2004 and still the condition of "manufacture" of the exempted goods would be required. We noticed that the Rule 6 of the Cenvat Credit Rules, 2004, as it existed prior to 28-2-2015, provide as follows :- "RULE 6. Obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted goods. It has to be seen that though the said explanation puts forward a deeming provision that non-excisable goods cleared on payment of consideration are also to be considered as exempted goods, there is no corresponding amendment made in sub-rule (1) of Rule 6 so that the goods that emerged out of process of manufacture falling in clause (1) are also to be considered as exempted goods. As per the settled decisions, the disputed goods which are not consciously manufactured by the appellant and which emerged unavoidably in the process of manufacture of other goods cannot be considered as goods manufactured by the appellant. Since disputed goods is not manufactured goods but the by-product which emerges/comes into existence in the process of manufacture of copper products, and therefore the production of Sulphuric Acid cannot be held to be manufacture of exempted goods. The judgment relied upon by the Ld. Advocate in the present matter squarely applicable and following the same we are also view that the demand cannot sustain. 14. We also find that the stand of the assessee is squarely covered by per para 3.7 of Chapter 5 of CBEC's manual which is reproduced below :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), Works Contract Services, etc. have also been used commonly for manufacture of various copper products as well as Di-Ammonium Phosphate (DAP). The exemption which is being availed by the appellant under Notification No. 12/2012-CE dated 17.03.2012 provides a condition that for availing the benefit of exemption under Notification No. 12/2012-CE serial No. 128 at the rate of 1%, the condition at Sr. No.25 clearly mentions that "if no credit under rule 3 or rule 13 of the Cenvat Credit Rules, 2004 has been taken in respect of the inputs or input services used in the manufacture of these goods". Since the impugned order-in- original has not specifically mentioned the use of any input service on which Cenvat credit has been taken by the appellant while manufacturing and clearing Di-Ammonium Phosphate by the appellant and if so, he has to re- calculate the demand of Cenvat credit giving benefit of the fact that appellant is entitled not to reverse Cenvat credit on the inputs which have been availed on the copper concentrate while manufacturing various copper products. 7. In view of the discussion in the preceding paras, we hold that the Adjudicating Authority has to segregate the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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