COMMISSIONER OF C EX Vs. FACT LTD

JUDGEMENT

(1.) This appeal filed under Section 35G of the Central Excise Act, 1944 arises from Annexure A4 order dated 28-10-2004 issued by the Commissioner of Customs and Central Excise (Appeals), Cochin and Annexure A6 order dated 16-2-2008 issued by the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore. The brief facts of the case are as follows: The respondent herein is engaged in the manufacture of dutiable goods such as caprolactam, nitric acid, soda ash & CO2, ammonia, sulfuric acid and non-dutiable goods such as ammonium phosphate, lactam, ammonium sulphate (fertilizer) in their Petro Chemical Division and Udyogamandal Division. During the period from March, 2000 to November, 2002, the respondent availed CENVAT credit on furnace oil/LSHS. On the terms of Rule 57A(2) and 6(2) of Cenvat Credit Rules, 2001 and Rule 6(2) of CENVAT Credit Rules, 2002, Annexure A1 series of show cause notices were issued to the respondent. The respondent thereupon submitted Annexure A2 series of replies. After considering the replies submitted by the respondent in their objections to the show cause notice, the Deputy Commissioner, Central Excise and Customs, Ernakulam I Division issued Annexure A3 order dated 21-10-2003 holding that inputs intended to be used as fuel are specifically excluded from the purview of sub-rule (2) of Rule 57AD or Rule 6 of Cenvat Credit Rules, 2001/2002 and therefore, the assessee is not allowed to take credit on such quantity of inputs used in the manufacture of exempted goods, though the same are manufactured along with dutiable goods using the same inputs. The said officer accordingly conformed the demand in the show cause notices and held that the sum of Rs. 16,98,13,555/- is recoverable along with interest. However, having regard to the special circumstances of the case, he refrained from imposing any penalty on the assessee.

(2.) Aggrieved by Annexure A3 order passed by the Deputy Commissioner, Central Excise and Customs, Ernakulam I Division, the respondent filed an appeal before the Commissioner of Central Excise. By Annexure A4 order passed on 21-8-2004, the appellate authority allowed the appeal, relying on the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore in Appeal No. E/141/2002, dated 17-9-2003, an appeal filed by the Commissioner of Central Excise, Calicut against Grasim Industries Ltd. The Customs, Excise & Service Tax Appellate Tribunal, had in that case relied on the decision of the Tribunal in Naveen Chemicals Enterprises, 2002 147 ELT 234, 2002 51 RLT 177 (Tribunal) and National Engineering Industries,2002 150 ELT 161. The appellate authority held that in view of the binding decision of the Bangalore Bench, the appeal filed by the respondent is liable to be allowed. Aggrieved thereby, the appellant herein filed an appeal before the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore. By Annexure A6 order passed on 12-6-2007, the Appellate Tribunal concurred with the view taken by the appellate authority and dismissed the appeal. Hence this appeal under the Section 35G of the Central Excise Act, 1944.

(3.) The main issue that arises for consideration in this appeal is whether, the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench at Bangalore was right in holding that Cenvat credit on inputs used as fuel can be availed though part of the same is utilised for the manufacture of exempted final products and whether sub-rule (1) of Rule 57D of Central Excise Rules, 1994 and sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2001/2002 would apply to inputs used as fuel for the manufacture of exempted final products since sub-rule (2) of the aforesaid Rules excluded inputs used as fuel from its purview.