PASWARA PAPERS LTD. Vs. CCE

JUDGEMENT

(1.) The issues involved in this appeal, filed by M/s. Paswara Papers Ltd., are whether the Cenvat Credit of duty paid on light Diesel Oil (LDO) and Furnace Oil (FO) used in the manufacture of exempted products is available to them and whether the demand raised in show cause notice dated 4.7.2002 is time -barred.

(2.) Shri Krishan Kant, learned Advocate, mentioned that the Appellants manufacture Kraft Liner/Karft Board and avail of Cenvat credit on the various inputs used in the manufacture of their final product; that they are also availing the benefit of Notification No. 6/2000 -CE, dated 1.3.2000 (and subsequently Notification No. 3/2001 -CE, dated 1.3.2001), which exempts wholly the first clearances of 3500 M.T. of paper and paper products; that they had crossed the limit of 3500 M.T. on 30.6.2000 and upto 30.6.2000, they availed the Cenvat Credit of the duty amounting to Rs. 21,18,351 paid on LDO and FO; that out of the said Credit, they utilised Rs. 80,300 towards payment of duty in June 2000 and the remaining amount was utilized towards payment of duty in July 2000; that they had deposited the said amount by T.R. 6, Challan dated 10.11.2001 under protest; that two show cause notices dated 4.7.2002 for denying the Credit for the period 1.4.2000 to 30.6.2000 and dated 10.4.2002 for denying credit for the period 1.4.200 to 2.7.2001 had been issued to them; that the Commissioner, under the impugned order, confirmed the demands and imposed the penalties besides charging the interest on the ground that the Credit was not admissible to them during the period the final product manufactured by them was exempted wholly from the payment of duty.

(3.) The learned Advocate submitted that Sub -rule (1) of Rule 57AD of the Central Excise Rules, provides that Cenvat Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except for the circumstances mentioned in Sub -rule (2); that thus Sub -rule (1) is subject to Sub -rule (2) and the circumstances mentioned in Sub -rule (2) are "Except inputs intended to be used as fuel"; that the meaning of this phrase is that the credit shall not be allowed on all inputs used in exempted goods but full credit shall be allowed on input "Fuel" even if the input is used in the exempted goods; that Sub -rule (2) has created an exception in respect of inputs vised as fuel and neither any Credit is required to be reversed for such inputs used in the manufacture of final product cleared without payment of duty nor such final products are called upon to pay an amount of 8% of their price. The learned Advocate, further, submitted that the Commissioner has himself admitted in the impugned order that Sub -rule (2) of Rule 57AD permits the taking of credit on inputs fuel used in the manufacture of exempted goods; that thus the taking of credit on Fuel used in the manufacture of exempted goods is not disputed by the Department; that the main contention of the Adjudicating Authority is that both dutiable and exempted goods should be manufactured simultaneously; that Sub -rule (2) does not prescribe such condition of simultaneous manufacturing of dutiable and exempted products; that the main condition in Sub -rule (2) is that a manufacturer should manufacture both dutiable and exempted final products; that the Appellants are also manufacturing both dutiable and exempted goods in a financial year and they have also declared their intention to manufacture both categories of products in a financial year in advance at the time of filing Classification Declaration under Rule 173B of the Central Excise Rules; theat the Tribunal in the case of Rochiram and Sons v. CCE, Jaipur, 2003 (88) ECC 112 : 2003 (155) ELT 96 (J) has held that Sub -rule (2) of Rule 57AD does not require an assessee to manufacture, on day -to -day basis, both dutiable and exempted goods. Reliance has also been placed on the decision in the case of Indore Steel and Iron Mills Ltd, v. CCE, Indore, 2002 (147) ELT 611 (T) wherein it has been held that "a comprehensive and harmoneous reading of the above provisions leads me to conclude that the rules have created an exception in respect of the inputs used as fuel".