CEA No. 20 of 2011 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.M. No. 7561-CII of 2011 and CEA No. 20 of 2011 Date of Decision: 8.8.2011 Commissioner, Central Excise Commissionerate ....Appellant. Versus M/s Pioneer Agro Industries Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Gurpreet Singh, Standing Counsel for the appellant. AJAY KUMAR MITTAL, J. 1. Delay in refiling the appeal is condoned. 2. This appeal has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 (in short “the Act”) against the order dated 31.3.2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as “the Tribunal”) in appeal No. C/23/08, claiming the following substantial question of law:- “Whether the Tribunal (CESTAT) is justified in law in holding that the assessee is not required to reverse the Cenvat Credit as per Rule 6(3)(b) of the Cenvat Credit Rules against the inputs used in the CEA No. 20 of 2011 -2- manufacture of exempted finished products originated along with the manufacture of dutiable finished products?” 3. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee is engaged in the manufacture of vegetable product (Vanaspati), Refined Oil and Liquid Glucose. During the course of manufacture of Liquid Glucose from wheat and rice, the by-product, i.e. Gluten (S.H. 1104.00) and Spent Carbon (S.H. 3802.00), are generated which are fully exempted from duty. Similarly, Refined Oil and Vanaspati by-product, i.e. Spent Earth (S.H. 1507.00), was generated which was also exempted from duty. Since the said by-products have been generated as a result of consumption of common cenvatable inputs, namely, Hydrochloric Acid (HCL), Enzymes etc., the assessee was required to reverse an amount equal to 10% of the sale price of the said Gluten, Spent Carbon and Spent Earth at the time of clearance in terms of Rule 6(3)(b) of the Cenvat Credit Rules. The assessee had not opted to maintain separate accounts of manufacture of dutiable and exempted goods and was, therefore, required to pay 10% of the total sale price of the exempted final product as duty. Accordingly, the assessee was issued show cause notice dated 4.8.2005 for the recovery of an amount of Rs.4,19,791/- (equal to 10% of the total sale price of the exempted final product) along with interest and penalty. The Assistant Commissioner, Central Excise Division-II, Jalandhar vide order-in-original dated 18.4.2006 dropped the proceedings. The department accepted the part of the order relating to demand of Rs.8126/- pertaining to Spent Carbon CEA No. 20 of 2011 -3- and Spent Earth. Feeling aggrieved against remaining amount of Rs.4,11,665/-, the department filed an appeal before the Commissioner (Appeals) challenging the dropping of demand of Rs.4,11,665/- against the clearance of Gluten falling under Chapter sub-heading No.1104.00 who, vide order dated 4.10.2007 dismissed the appeal. On further appeal by the revenue, the Tribunal vide final order dated 31.3.2010 upheld the order of the Commissioner (Appeals) and dismissed the appeal. Hence, the present appeal by the department. 4. We have heard learned counsel for the appellant. 5. The adjudicating authority had noted that the assessee had not availed any Cenvat Credit on Hydrochloric Acid for the manufacture of Gluten. Similarly no benefit of Cenvat Credit had been taken by the assessee on Bleaching Earth (which had produced Spent Earth) and on Activated Carbon (which had produced Spent Carbon). It would be apposite to notice the finding recorded in the order-in-original which is as under:- “The Range Officer in whose jurisdiction the factory of the Noticee falls has also certified that M/s Pioneer Industries Ltd. had not taken utilized Cenvat Credit as HCL Bleaching Earth and Activated Carbon. The Range Officer has further certified that the credit of Rs.1497/- taken on 15.07.2004 was reversed in the same month on 31.07.2004 vide RG-23A Pt-II entry No.33 dt. 31.7.2004, even the Audit Officers in their Audit Report (FAR 334/2005) has mentioned that “the Assessee has debited amount of Rs.40,002/- CEA No. 20 of 2011 -4- vide RG-23 Pt-II entry no.33 dated 31.07.2004 with the remarks - “Cenvat Credit wrongly taken in respect of Hydrochloric Acid (HCL) from 02/2004 to 07/2004. The Assessee from 07/2004 to 12/2004 has not taken cenvat credit in respect of HCL.” From the Process Chart (Flow Diagram) prepared by Sh. S.B. Yadav of Engineers & Consultants (Starch, Glucose & Allied Products) 1008/2, Sawanpuri Jagadhri, Yamunanagar, I find that at the stage of Dissolving Process HCL is added but the Range Officer has already certified that during the period covered under the Show Cause Notice the Noticee has not taken Cenvat Credit on HCL. This fact has been further confirmed by the Audit Officers in their Audit Report. Hence, it cannot be said that Noticee has used cenvatted HCL for the manufacture of Gluten. From the Process Chart I further find that no other input was used in the manufacture of Gluten hence there is no liability of the Noticee to pay an amount equal to 10% of the price of the Gluten sold by them. Other inputs namely Enzymes, Filter Aids, Soda Ash and Activated Carbon were used in the manufacture of Liquid Glucose which the Noticee has cleared on payment of duty. And other by-products like Spent Earth and Spent Carbon are produced in the process CEA No. 20 of 2011 -5- of Glucose and as certified by the Range Officer, the Noticee has not taken Cenvat Credit on Bleaching Earth (which gives rise to Spent Earth) and on Activated Carbon (which gives rise to Spent Carbon), there is no liability of the Noticee to pay an amount equal to 10% of the price of the Spent Earth & Spent Carbon cleared by them under the Cenvat Credit Rules.” 6. On appeal, the Commissioner (Appeals) affirming the findings of the adjudicating authority had noted that the Cenvat Credit availed on 15.7.2004 was reversed during the same month and further no Cenvat Credit on Hydrochloric acid was availed from 8/2004 to 12/2004. The aforesaid conclusion was confirmed by the Tribunal. 7. The aforesaid finding has not been shown to be perverse or erroneous in any manner which may warrant interference by this Court. Accordingly, no substantial question of law arises in this appeal. The same is dismissed. (AJAY KUMAR MITTAL) JUDGE August 8, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE