Shree Digvijay Cement Co Ltd VERSUS C.C.E. & S.T.-Rajkot

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Excise Appeal No.10137 of 2013

(Arising out of OIO-82&83/COMMR/2012 dated 24/12/2012 passed by Commissioner of

Central Excise-RAJKOT)

Shree Digvijay Cement Co Ltd

VERSUS

C.C.E. & S.T.-Rajkot

APPEARANCE:

Shri J.C. Patel & Shri Rahul Gajera, (Advocates) for the Appellant

Shri. Tara Prakash, Assistant Commissioner (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

HON’BLE MEMBER (TECHNICAL), MR. RAJU

Final Order No. A/ 10008 /2023

DATE OF HEARING: 20.12.2022

DATE OF DECISION: 05.01.2023

RAMESH NAIR

The issue involved in the present case is that whether the benefit of

captive consumption exemption notification no.67/95-CE dated 16.03.1995

can be denied to the quantity of Clinker which was used within the factory to

manufacture of the part of the cement which was cleared against

International competitive bidding with duty exemption under Serial No. 91 of

Notification No.6/2006-CE dated 01.03.2006..

Shri J.C. Patel, learned counsel appearing on behalf of the appellant at

the outset submits that this issue has been considered by this tribunal in the

appellant’s own case and also other judgments. He placed reliance on the

following judgments:-

 SHREE DIGVIJAY CEMENT CO LTD- 2018 (11) TMI-300-CESTAT

Ahmedabad

 THERMO CABLES LTD.- 2013 (292) ELT 412

 KEI INDUSTRIES LTD.- 2017 (357) ELT 1230

 BHARAT ALUMINIUM CO LTD.- 2017 (345) ELT 685

 ULTRATECH CEMENTS LTD.- 2016 (343) ELT 164

Shri Tara Prakash, learned Assistant Commissioner (AR) appearing on

behalf of the revenue reiterates the finding of the impugned order.

We have carefully considered the submissions made by both the sides

and perused the records. We find that the identical issue in the appellant’s

own case has been considered by this tribunal and by detailed order the

appeal was allowed. The relevant order portion is reproduced below:-

We have carefully considered the submissions made by both the sides

and perused the records, we find that the appellant have manufactured

Clinker which is an intermediate product and the same was consumed in

the manufacturing of other final product i.e. Cement. The said final product

i.e. Cement has been cleared against “International Competitive Bidding”

in terms of Exemption Notification No. 6/2006-CE dated 01.03.2006,

according to which the rate of duty is nil. The appellant availed Exemption

Notification in respect of the Clinker under notification 67/95-CE which

reads as under:

“In exercise of the powers conferred by subsection (1) of section 5A of the

Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of

the Additional Duties of Excise (Goods of Special Importance Act, 1957 (58 of

1957), (herein after referred to as the said Special Importance Act), the

Central Government, being satisfied that it is necessary in the public interest

so to do, hereby exempts.

i) capital goods as defined in rule 3 of the CENVAT Credit Rules, 2002,

manufactured in a factory and used within the factory of production;

(ii) goods specified in column (1) of the Table hereto annexed (hereinafter

referred to as ‘inputs’) manufactured in a factory and used within the factory

of production in or in relation to manufacture of final products specified in

column (2) of the said Table;

from the whole of the duties of excise leviable thereon which is specified in

the Schedules to the Central Excise Tariff Act, 1985 (5 of 1986) or additional

duty of excise leviable thereon, which is specified in the Schedule to the said

Special Importance Act:

Provided that nothing contained in this notification shall apply to inputs used

in or in relation to the manufacture of final products which are exempt from

the whole of the duty of excise or additional duty of excise leviable thereon or

are chargeable to nil rate of duty, other than those goods which are cleared :-

to a unit in a Special Economic Zone, or
to a hundred per cent Export Oriented Undertaking or

iii. to a unit in an Electronic Hardware Technology Park, or

to a unit in a Software Technology Park, or
under notification No. 108/95-CE, dated the 28th August, 1995, or
by a manufacturer of dutiable and exempted final products, after

discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules,

Table

Description of inputs

Description of final

products

(1)

(2)

All goods falling under the First

All goods falling under the

Schedule to the Central Excise

Tariff Act, 1985 (5 of 1986), other

than light diesel oil, high speed

diesel oil and motor spirit,

commonly known as petrol

First Schedule to the

Central Excise Tariff Act,

1985 (5 of 1986),

From the plain reading of the above notification, it is observed that as

per the above Notification, exemption is available in respect of goods used

captively in the factory, within the factory of production in relation to

manufacturing of final product. The Proviso to above notification provides

that nothing contain in this Notification shall apply to inputs used in or

relation to the manufacture of final product which are exempted from the

whole duty of excise or chargeable to nil rate of duty, however the

exception to this Proviso is provided in respect of supplies meant as

mentioned in Clause I to V and also under Clause (VI) when the obligation

prescribed in Rule 6 of Cenvat Credit Rule, 2001 is discharged. The

Exemption is available in respect of inputs used captively even though the

final product is cleared under exemption as per Rule 6(6)(vii) of Cenvat

Credit Rules, 2004 since the appellant’s supply of final product is under

Notification no. 6/2006-CE. The appellant has discharged the obligation

prescribed in Rule 6 of Cenvat Credit Rules, 2004, therefore, even though

the final product of the appellant is cleared under exemption from the

whole of the duty but since it is under Notification 6/2006-CE in terms of

Rule 6(6)(vii) of Cenvat Credit Rules, the Notification No.67/95-CE is

legally eligible to the supply made by the appellant. This issue has been

considered in the case of Thermo Cables Ltd (Supra) wherein the Tribunal

has passed the following order:

“4.After considering the submissions, we have found great force in the

submissions made by the learned counsel. It is not in dispute that the final

products were cleared without payment of duty under Notification No.6/2006

CE which, at Sl.No.91 thereof, prescribed “nil” rate of duty for all goods

(falling under any chapter) supplied against international competitive bidding.

This exemption was subject to the condition that the goods were exempted

from basic customs duty and additional duty of customs when imported into

India. It is not in dispute that the final products cleared by the assessee

without payment of duty during the relevant period satisfied this condition.

Against this backdrop, one has to read the provisions of Rule 6(6)(vii) of the

CENVAT Credit Rules 2004. This sub-rule reads as follows:-

(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in

case the excisable goods removed without payment of duty are either

(i) ——————————–

(ii) ——————————

(iii) —————————–

(iv) ——————————-

(v) ———————————-

(vi) ——————————–

(vii) all goods which are exempt from the duties of customs leviable under the

First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional

duty leviable under Section 3 of the said Customs Tariff Act when imported

into India and supplied against International Competitive Bidding in terms of

Notification No.6/2002-Central Excise dated the 1st March, 2002 or

Notification No.6/2006-Central Excise dated the 1st March, 2006, as the case

may be.

From the above provision, it is clear that the appellant did not have any

liability under sub-rule (2) to maintain separate accounts for receipt,

consumption and inventory of inputs meant for use in the manufacture of

dutiable final products and inputs meant for use in the manufacture of

exempted goods, nor did the assessee have alternative liability under sub-rule

(3) to pay an amount equal to 10% of the value of the exempted goods. This

is because their final products were cleared against international competitive

bidding in terms of Notification No.6/2006 CE ibid.

Against the above backdrop, one has to examine the scope of Notification

No.67/95 CE dt. 16/03/1995 (as amended) in so far as the present case is

concerned. The opening paragraph of this Notification exempts from payment

of CE duty any inputs manufactured in a factory and used within the same

factory in or in relation to the manufacture of final products. Input must be

one of those specified in the first column and the final product must be one of

those specified in the second column of the table annexed to the Notification.

Admittedly, copper wire is one of the inputs and the power cables

manufactured and cleared by the assessee are final products covered by the

Notification. However, the Department would like to deny the benefit of this

Notification to copper wire manufactured by the assessee and captively

consumed in their factory for the manufacture of insulated (power) cables.

According to the Revenue, the assessees claim is hit by the proviso to the

Notification, which reads as under:

Provided that nothing contained in this notification shall apply to inputs used

in or in relation to the manufacture of final products which are exempt from

the whole of the duty of excise or additional duty of excise leviable thereon or

are chargeable to nil rate of duty, other than those goods which are cleared, –

–

(i)

to a unit in a Free Trade Zone, or

(ii)

to a hundred per cent Export Oriented Undertaking, or

(iii)

to a unit in an Electronic Hardware Technology Park, or

(iv)

to a unit in a Software Technology Park, or

(v)

under notification No.108/95-Central Excise, dated the 28th August,

1995, or

(vi)

by a manufacturer of dutiable and exempted final products, after

discharging the obligation prescribed in Rule 6 of the CENVAT Credit

Rules, 2001.

From the above proviso to Notification No.67/95-CE ibid, it appears that

the bar created therein is not applicable to the inputs used in or in relation to

the manufacture of exempted final products cleared by a manufacturer of

such exempted final products as well as dutiable final products. In other

words, where the manufacturer manufactures both dutiable and exempted

final products and uses the inputs in question in the manufacture of the

exempted final products, he is entitled to the benefit of exemption from

payment of duty on such inputs in terms of the opening paragraph of the

Notification. This right is not hit by the opening portion of the proviso to the

Notification as the manufacturer is squarely covered by the exception carved

out of the proviso vide clause (vi) under the proviso. The Department, it

appears, would like to drive the assessee out of the purview of this exception

on the ground that the latter had not discharged the obligation prescribed in

Rule 6 of the CENVAT Credit Rules 2004. We have already held that the

assessee did not have any liability under sub-rules (1) to (4) of Rule 6

inasmuch as these sub-rules were not applicable, by virtue of sub-rule (6), to

the assessee who were clearing their exempted final products against

international competitive bidding in terms of Notification No.6/2006-CE ibid.

In other words, a conjoint reading of sub-rule (6) of Rule 6 of the CENVAT

Credit Rules 2004 and clause (vi) under the proviso to Notification No.67/95-

CE ibid would show that the assessees claim for exemption from payment of

duty on copper wire under the Notification was not hit by the opening portion

of the proviso to the Notification.

In the result, the assessee was not liable to pay CE duty on copper wire

manufactured and captively used in the manufacture of insulated (power)

cables in the factory during the material period. The impugned demands and

the connected penalties are, therefore, liable to be set aside. It is ordered

accordingly.

Both the appeals are allowed.”

The same issue has also been considered by Tribunal in the case of Kei

Industries Ltd (Supra) wherein the Coordinate Bench of this Tribunal

following the Thermo Cables Ltd judgment passed following order:

“7.On careful consideration of submissions of both the sides, the short issue

emerges before us is whether the appellants are liable to pay the duty on

intermediate product i.e. armoured cable, which has been used for

manufacture of power cables which is ultimately cleared on payment of duty

in the open market and to Mega Power Projects without payment of duty. 8.

An identical issue came up before the Tribunal in the case of Thermo Cables

Ltd. (supra) wherein this Tribunal observed as under: 4. After considering the

submissions, we have found great force in the submissions made by the

learned counsel. It is not in dispute that the final products were cleared

without payment of duty under Notification No. 6/2006-C.E. which, at Sl. No.

91 thereof, prescribed “nil” rate of duty for all goods (falling under any

chapter) supplied against international competitive bidding. This exemption

was subject to the condition that the goods were exempted from basic

customs duty and additional duty of customs when imported into India. It is

not in dispute that the final products cleared by the assessee without

payment of duty during the relevant period satisfied this condition. Against

this backdrop, one has to read the provisions of Rule 6(6)(vii) of the CENVAT

Credit Rules, 2004. This sub-rule reads as follows :-

(6)The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in

case the excisable goods removed without payment of duty are either

(i)————————–

(ii)————————–

(iii)————————-

(iv)————————–

(v)————————–

(vi)————————-

(vii)all goods which are exempt from the duties of customs leviable under the

First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional

duty leviable under Section 3 of the said Customs Tariff Act when imported

into India and supplied against International Competitive Bidding in terms of

Notification No. 6/2002-Central Excise, dated the 1st March, 2002 or

Notification No. 6/2006-Central Excise, dated the 1st March, 2006, as the

case may be.

From the above provision, it is clear that the appellant did not have any

liability under sub-rule (2) to maintain separate accounts for receipt,

consumption and inventory of inputs meant for use in the manufacture of

dutiable final products and inputs meant for use in the manufacture of

exempted goods, nor did the assessee have alternative liability under sub-rule

(3) to pay an amount equal to 10% of the value of the exempted goods. This

is because their final products were cleared against international competitive

bidding in terms of Notification No. 6/2006-C.E. ibid.

Against the above backdrop, one has to examine the scope of Notification

No. 67/95-C.E., dated 16-3-1995 (as amended) in so far as the present case

is concerned. The opening paragraph of this Notification exempts from

payment of CE duty any inputs manufactured in a factory and used within the

same factory in or in relation to the manufacture of final products. Input must

be one of those specified in the first column and the final product must be one

of those specified in the second column of the table annexed to the

Notification. Admittedly, copper wire is one of the inputs and the power cables

manufactured and cleared by the assessee are final products covered by the

Notification. However, the Department would like to deny the benefit of this

Notification to copper wire manufactured by the assessee and captively

consumed in their factory for the manufacture of insulated (power) cables.

According to the Revenue, the assessees claim is hit by the proviso to the

Notification, which reads as under :

Provided that nothing contained in this notification shall apply to inputs used

in or in relation to the manufacture of final products which are exempt from

the whole of the duty of excise or additional duty of excise leviable thereon or

are chargeable to nil rate of duty, other than those goods which are cleared,

(i)

to a unit in a Free Trade Zone, or

(ii)

to a hundred per cent Export Oriented Undertaking, or

(iii) to a unit in an Electronic Hardware Technology Park, or

(iv) to a unit in a Software Technology Park, or

(v)

under notification No. 108/95-Central Excise, dated the 28th August,

1995, or

(vi) by a manufacturer of dutiable and exempted final products, after

discharging the obligation prescribed in Rule 6 of the CENVAT Credit Rules,

From the above proviso to Notification No. 67/95-C.E. ibid, it appears that