NESTLE INDIA LTD. Vs. CCE, LUDHIANA

JUDGEMENT

(1.) THIS appeal at the instance of the assessee is directed against the order passed by the Commissioner of Central Excise dated 16.4.2003. The dispute relates to the question whether the appellants are entitled to CENVAT credit of the duty paid on the input, namely, Residual Fuel Oil (RFO)/Furnace Oil purchased by the appellant on payment of excise duty. The appellants are engaged in the manufacture of various edible products. Some of the products manufactured by the appellants are either exempt or chargeable to nil rate of duty and some other products are dutiable on which the appellants pay excise duty payable on them. The RFO is used by the appellants as fuel in the boilers for generation of steam. The steam so generated is used in the manufacture of various final products. No part of the steam so generated is used for any purpose other than manufacturing process. The appellants received show cause notices alleging that inasmuch as the appellants had taken credit of the duty paid on RFO which has been used in the manufacture of both dutiable and exempted final products, the appellants are liable to pay an amount equal to 8% of the price of the exempted final products in terms of Rule 57CC. In the order of adjudication, the Commissioner held that since the appellants had reversed the modvat credit attributable to the RFO, in view of the circular No. 591/28/2001 -CX. Dated 18.10.2001 issued by CBEC, the demand of 8% of the price of the exempted products cannot be sustained. The Commissioner thereupon ordered to recover Rs. 1,80,49,568/ -, that is the entire amount available as modvat credit on RFO as common input and used for manufacture of dutiable and exempted goods under Rule 57 - I of the Central Excise Rules read with Section 11A of the Central Excise Act. The above amount was ordered to be adjusted against an amount of Rs. 2,40,87,274/ - already debited by the noticee in two instalments. He imposed a penalty to the extent of Rs. 1,89,49,568/ - under Rule 57 -(I)(4) read with Section 11AC. Interest as provided under Section 57(I)(5) of the Rules read with Section 11AB was also ordered.

(2.) IT is seen that the Commissioner rejected the contention raised by the assessee on the basis of the decision of the Larger Bench of this Tribunal in Ballarpur Industries Ltd. v. CCE Belgaum, 2000 (116) ELT 312 (T) :, 2000 (91) ECR 263 (T) on the ground that in the facts of the above case the inputs used for generation of electricity was in turn used for manufacture of excisable goods whereas in the present case steam produced out of RFO is used in the manufacture of both dutiable and exempted goods. The appellants are fully justified in contending that the credit cannot be denied even if the steam is utilised for manufacture of exempted final products also in the light of the proviso inserted to Rule 57A w.e.f. 18.5.1995. The above proviso reads as follows: - -