GLAXO SMITHKLINE CONSUMER Vs. CCE

JUDGEMENT

(1.) This is an appeal filed by M/s. GlaxoSmithKline Consumer Healthcare Limited against the Order -in -Original No. 87/2002 -RP dated 31.12.2002 passed by the Commissioner of Central Excise, Visakhapatnam.

(2.) The appellants are engaged in the manufacture of Bulk Horlicks falling under Chapter Sub -heading No. 1901.92 of the Central Excise Tariff. They are availing Modvat credit on the inputs namely Hydrochloric Acid, caustic Soda Lye and Malted barely, Hydrochloric acid and caustic soda lye are common inputs for manufacture of horlicks which is dutiable, and ghee and husk are chargeable to NIL rate of duty. As per rule 57 C(1) of Central Excise Rules, 1944, modvat credit is not allowed on such quantity of inputs which is used in the manufacture of final products which are exempt from the whole of the duty of Excise or are chargeable to NIL rate of duty. according to Rule 57C(2) of Central Excise Rules, where a manufacturer avails of the credit of specified duty on any inputs and is engaged in the manufacture of any final product which is chargeable to duty as well as in the manufacture of any other final product which is exempt from the whole of the duty of excise or is chargeable to NIL rate of duty, the provisions of sub -rule (1) of Rule 57C shall be deemed to be satisfied only when the manufacturer follows the procedure prescribed in sub -rule (1) of Rule 57CC or the provisions of sub -rule (9) of Rule 57CC. The appellants have not maintained any separate accounts or records for receipt of the inputs under sub -rule (9) of Rule 57CC for the proportionate quantity of common inputs viz. hydrochloric acid, caustic soda lye and malted barely used in relation to manufacture of exempted products viz. ghee and husk. Therefore, they were required to pay 8% of the whole value of these goods as laid down under Rule 57CC (1). Shri Seshadri, Manager(Finance) of the Appellants Company, in his statement, stated that they have reversed modvat credit availed on hydrochloric acid, caustic soda lye from 01.09.1996 to 31.10.1996 and they have stopped availing credit on these two inputs from 01.11.1999. A show Cause Notice was issued to the appellants demanding duty of Rs. 91,88,731/ - being 8% of the value of ghee cleared from 01.09.1996 to 31.10.1999 and an amount of Rs. 4,75,379 being 8% of the value of husk cleared from 01.09.1996 to 29.02.2000 as payable under Rule 57CC(1). interest on delayed payment was also demanded and proposal was also made for imposition of penalty under Section 11AC and Rule 173Q(1) (bb) of Central Excise Rules, 1944, The case was adjudicated by the Commissioner, visakhapatnam, who demanded an amount of Rs. 91,88,731/ -. being 8% of the value of ghee removed during the period from 01.09.1996 to 31.10.1996 in terms of Rule 57CC(1) for their failure to maintain separate inventory and accounts of the receipt and use of inputs, as required under Rule 57CC(9). He dropped the demand of Rs. 4,75,379/ - related to husk. He also imposed a penalty of Rs. 5,00,000/ - under Rule 173Q(1)(bb) of Central Excise Rules for failure to comply with the prescribed procedure under Rule 57CC.

(3.) Shri G. Shiva Dass, the learned Advocate for the appellants stated that the appellants are engaged in the manufacture of Bulk Horlicks. The raw -materials used in the manufacture of Horlicks are barley grains and wheat flour. The milk is received by the appellants from collection centers. It is tested for fat content and non -fat solids. Then it is pasteurised and stored. It is thereafter standardised by using skimmed milk/skimmed milk powder. Since horlicks should contain a specified percentage of fat the excess fat in the form of cream in the milk is removed/separated and the milk containing the required fat alone is sent to the evaporators for further processing to manufacture the horlicks. The cream separated from the milk is pumped into the ghee boiler and is heated with the steam pressure. After due process of settling, ghee emerges and thereafter packed in tins. The malted barley grains are crushed to powder and barley powder and wheat flour are added into the mash tank. By heat treatment with the steam, the starch in malted barley and wheat flour is converted into smaller sugars in the form of a liquid. This liquid is filtered to separate the husk. The milk with required fat and the liquid separated from the husk are thereafter subjected to further detailed processes to manufacture bulk horlicks. The appellants cleared both ghee and husk from their factory by availing exemption from payment of duty. They used caustic soda lye and hydrochloric acid for demineralization of water in the demineralization plant. The demineralised water starch in the barley as well as for heating the cream in the ghee boiler, apart from being used in remaining process of manufacture of horlicks. The appellants claimed modvat credit of the duty paid on caustic soda lye and hydrochloric acid.