Case Law Details
M/s. APL Apollo Tubes Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The issue is whether appellants have to pay an amount of 6% of the value of the zinc scrap cleared by them. The department has relied upon Explanation (1) introduced w.e.f. 01.03.2015 to demand the duty raised in the SCN. It has to be seen that though the said Explanation puts forward a deeming provision that non-excisable goods cleared by 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 settled decisions, the goods which are not consciously manufactured by the appellants and which emerged in the process of manufacture cannot be considered as goods manufactured by the appellants. Thus, when the zinc scrap which is a waste arising out of process of manufacture of finished goods, is not goods manufactured by the appellant, the same cannot be considered as exempted goods manufactured by them.
FULL TEXT OF THE CESTAT JUDGEMENT
The brief facts of the case are that appellants are engaged in manufacture of Galvanised Steel Tubes & Pipes and Galvanised HR Sheets availing cenvat credit on inputs, capital goods and input services. During the course of scrutiny of accounts, it was noticed that they have contravened provisions of Rule 6 of Cenvat Credit Rules, 2004 during the period from March 2015 to June 2017 as they have not maintained separate accounts for use of inputs in the manufacture of dutiable and exempted final products (Zinc scrap cleared by them on consideration). Hence show cause notice was issued proposing to demand an amount equal to 6% of the value of the zinc scarp (exempted goods cleared by them) along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalty. In appeal, the Commissioner (Appeals) upheld the demand, interest however reduced the penalty to 10%.
2. The Ld. Counsel Shri R.S. Sharma appeared and argued the matter on behalf of the appellant. He submitted that appellant is not manufacturing ‘zinc scrap’ and these goods emerged as waste in the process of manufacture of finished products. Appellant has no intention to manufacture zinc scrap and therefore these cannot be considered as exempted goods manufactured by the appellant. Though Explanation (1) was added to Rule 6 (1) of CCR, 2004 with effect from 1.3.2015, the same cannot be applied in respect of zinc scrap cleared by the appellant for the reason that sub-rule (1) of Rule 6 has not been amended so as to make the zinc scrap emerging out of manufacture of dutiable goods to be exempted goods manufactured by the appellants. He relied upon the decision of the Tribunal in the case of Bajaj Hindusthan Sugar Ltd. vide Final Order No.70955-70958/2019 dt. 15.05.2019 and M/s.Triveni Engineering & Industries Ltd. Vs CC & C.E. & ST Noida in Final Order No.71157/2018 dt. 19.06.2018.
3. Ld. A.R. Shri B. Balamurugan supported the findings in the impugned order. He argues that after the addition of Explanation (1) to Rule 6 (1) of CCR 2004, it can be seen that even non-excisable goods which are cleared for consideration would fall within the category of exempted products. Thus, the zinc scrap cleared by the appellant are exempted goods manufactured by the appellants and therefore the appellants ought to have maintained separate accounts. On failure to maintain separate accounts, they are liable to pay 6% of the value of the zinc scrap cleared by them. The demand, interest and penalties imposed are therefore legal and proper.
4. Heard both sides.
5. The issue is whether appellants have to pay an amount of 6% of the value of the zinc scrap cleared by them. The department has relied upon Explanation (1) introduced w.e.f. 01.03.2015 to demand the duty raised in the SCN. It has to be seen that though the said Explanation puts forward a deeming provision that non-excisable goods cleared by 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 settled decisions, the goods which are not consciously manufactured by the appellants and which emerged in the process of manufacture cannot be considered as goods manufactured by the appellants. Thus, when the zinc scrap which is a waste arising out of process of manufacture of finished goods, is not goods manufactured by the appellant, the same cannot be considered as exempted goods manufactured by them. The Tribunal in the case of M/s.Bajaj Hindustan Sugar Ltd. vide Final Order stated supra had occasion to consider the very same issue and held as under :
“4. After hearing both the sides duly represented by learned AR, Shri Mohammad Altaf appearing for the Revenue and learned advocate Ms. Stuti Saggi on behalf of the respondent, we find that the issues are no more res integra. The Revenue’s only grievance is that the precedent decision followed by the Commissioner (Appeals) would not apply after amendment in the provisions of sub-rule (1) of Rules 6 of Cenvat Credit Rules adding an explanation therein w.e.f. 01 March, 2015. We find that the said grounds of the Revenue was dealt with by the Tribunal in the case of Commissioner of Central Excise & Service Tax, Meerut-I V/s M/s Bajaj Hindusthan Sugar Ltd. vide Final Order No.70916/2019 dated 01 May, 2019 it was observed as under:-
“3. I have heard the learned Departmental Representative on behalf of the Revenue. The respondents were manufacturers of sugar and molasses. They were removing Bagasse and Press Mud. The period covered is from 1st March 2015 to 31st March 2016. In view of the amendment in explanation under sub-rule (1) of Rule 6 of Cenvat Credit Rules, 2004 w.e.f. 01.03.2015 there was an obligation on the part of the manufacturer to pay amount under sub-rule 3 of said Rule 6 at a fixed percentage of the value of non-excisable goods removed when Cenvat Credit on input and input services were availed and such inputs and input services were used in the manufacture of excisable as well as exempted goods including non-excisable goods. Therefore proceedings were initiated against the respondent for recovery of around Rs.44.00 Lakhs. On perusal of record I note that the issue is covered by precedent decision in respondent’s own case in respect of their another unit through Final Order No.70801/2019 dated 18.04.2019. It was held in the said Final Order that Press Mud and Bagasse are not arising out of manufacturing activity and the same are agricultural waste and residue and therefore since the said Final Order is applicable in the present case I uphold the impugned order and reject the appeal filed by Revenue.”
Similar decision has been taken in the other final orders relied upon by the Ld. counsel for the appellant. Respectfully following the decision of the Division Bench of the Tribunal, I am of the view that that the demand cannot sustain. The impugned orders are set aside. Appeal is allowed with consequential relief, if any, as per law.
(dictated and pronounced in court)
