COMMISSIONER OF CUSTOMS Vs. LANCO INDUSTRIES LTD.

JUDGEMENT

(1.) REVENUE has filed this appeal against Order -in -Original No. 04/2006 dated 6.2.2006 passed by the Commissioner of Customs and Central Excise, Tirupati.

(2.) THE issue involves interpretation of notification 67/95 and Rule 6 of Cenvat Credit Rules.

(3.) THE respondents are manufacturers of Pig Iron, Cement and Ductile Iron Pipes. All these items are dutiable. They are having separate divisions for the manufacture of these three excisable products. The raw materials for the manufacture of DI Pipes are Pig Iron and Cement. During the period from April 2004, February 2005, the respondents availed exemption for the Pig Iron and Cement manufactured by them under notification 67/95 and captively consumed for the manufacture of DI Pipes. The DI Pipes were partly cleared on payment of duty and partly cleared on exemption. The point at issue is whether the Commissioner was correct in allowing the benefit of exemption notification 67/95 to the respondents. A show cause notice was issued to the respondents holding that the exemption 67/95 is not available to Pig Iron and Cement manufactured and captively consumed by the respondents. The reasons are that the Pig Iron and Cement manufactured cannot be called as intermediary goods, as they themselves are final products and therefore duty has to be discharged. The other objection is the final product DI Pipes are cleared by the respondents free of duty by availing two exemption notifications. Since, the final products are cleared by availing exemption notifications, benefit of notification 67/95 will not be applicable to the Pig Iron and Cement in terms of the proviso to the said notification. A show cause notice demanded Rs. 2,56,94,123/ - on Pig Iron and Rs. 5,41,350/ - on the Cement. The Adjudicating Authority after careful analysis of the relevant notification and the relevant Rule of Cenvat Credit Rules, came to the conclusion that the demand is not sustainable. Hence, he dropped the demand. However, the Revenue is aggrieved over the impugned order and therefore Revenue has filed this appeal. The main ground of appeal of the Revenue is that the Pig Iron and Cements manufactured by the respondents are captively consumed. They would be entitled for the benefit of notification 67/95 only when the final products are cleared on payment of duty. In the present case a part of the final products are cleared on the basis of two exemption notifications. Therefore, the benefit of exemption notification 67/95 will not be applicable. According to the Revenue, in a situation like this, even Rule 6 of Cenvat Credit Rules is not applicable. The learned Departmental Representative reiterated the grounds of appeal.