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M/S Somaiya Organic (India) v. Collector Of Central Excise - CENTRAL EXCISE REFERENCE APPLICATION No. 52 of 1995  RD-AH 8022 (30 April 2007)
Court No. 37
CENTRAL EXCISE REFERENCE NO. 52 OF 1995
M/s. Somaiya Organic (India)
Collector of Central Excise, Allahabad
Hon'ble Sushil Harkauli, J.
Hon'ble Ajai Kumar Singh, J.
We have heard learned counsel for the assessee at length.
The following two questions have been referred in this reference :
"i) Whether in the facts and circumstances of the case, the Tribunal was correct in law in holding that Solvent 75 is not a waste or by-product, thus affecting the eligibility of the applicants to the benefit of Rule 57 M (1) ?
ii) Whether the provisions of Section 11 A CESA, 1944 are to be read into Rule 57 P of the Central Excise Rules 1944 ?"
The First Question : The assessee is engaged in the manufacture of products like Butyl Alcohol (Butanol). Butyl Acetate, Acetyl dehyde, Acetic Acid and Ethyl Acetate. In the Butyl Acetate Section, first crude butanol is produced. This is further processed and pure Butanol is recovered. The impurities present in the crude Butanol are taken out from the bottom of the column. The mixture containing impurities (which are remnants) are called heavy products. Similarly, from Butanol, impurities left behind are collected. They contain a mixture of Butanol, Butanol Acetate and other higher alcohol, aldehyde and water. Whenever required these are esterified. This residue is called product to be burnt. This mixture of heavy product and products to be burnt is called Solvent 75.
Under Notification 231/87 issued under Rule 57 K of the Central Excise Rules, money credit is available of duty paid on Ethyl Alcohol (i.e. raw material) towards duty payable on various final products such as Butanol, Butyl Acetate, etc. The Department issued a show cause notice on 16.6.89 proposing reversal of money credit on the quantity of Ethyl Alcohol relatable to Solvent 75 and Paraldyhe on the ground that these two products are not specified as final products for the purpose of money credit under the notification (supra). By order dated 29.12.89, the Superintendent passed an order denying money credit to the assessee and calling upon the assessee to debit the money credit availed into the RG 23 A Part II. The Collector (Appeals) rejected the appeal of the assessee on the ground that the two products are not waste but are identifiable final products not specified under the Notification. The Tribunal upheld the order of the lower appellate authority.
It is thus, clear that Solvent 75, which has a market value as a manufactured product, cannot be said to be a waste product. The surviving question is, whether it is a "by-product" or it is not a "by-product".
Normally, a "by-product" is a product, which is obtained midway during the process of manufacture of the main product. It would remain a "by-product" even if the product so obtained midway is required to undergo some small amount of further treatment or processing to bring it to a finished or marketable form. However, where what so obtained midway is required to undergo considerable processing before it can be brought to a finished or marketable form, and more so when additives have also to be added during such further processing, it may travel outside the concept of "by-product" and may well become a different final product. Thus, whether the product is a "by-product" or is a different final product would have necessarily to depend upon the facts of each case. The Tribunal has upheld the view - that on the facts and circumstances of the case Solvent 75 was not a "by-product" or a waste, but was different finished product. We have not been shown any good ground to differ.
In the circumstances, our answer to the first question is that the Tribunal was correct in law in holding that Solvent 75 on the facts and circumstances was not a waste or a "by-product".
The Second Question : Rule 57 P of the Central Excise Rules, 1944 deals with disallowing of credit on inputs, if the credit has been taken wrongly, and provides for consequent adjustment of the wrongly taken credit.
Section 11 A of the Central Excise Act, 1944 deals with recovery of duties :-
(1) not levied; or
(2) not paid; or
(3) what levied; or
(4) short paid; or
(5) erroneously refunded.
Thus, essentially in terms of Section 11 A, which contains the time limitation, applies only to the above 5 cases and does not apply to 'adjustment' of 'credit' on inputs taken wrongly. No reason has been shown to us and no judicial precedent has been cited before us to the effect that Section 11 A applies to credit adjustment under Rule 57 P.
Thus, because Section 11 A does not in terms apply to Rule 57 P, therefore, such application, if canvassed by the assessee, would require to be supported by strong cogent reason.
The only reason advanced before us on behalf of the assessee is that because under Rule 57 P, if credit adjustment is not possible for any reason the cash recovery has been permitted, therefore, the provisions of Section 11 A should be held to apply not only to the cash recovery part but also to the credit adjustment part of Rule 57 P. We are unable to agree. The cash recovery is of credit on inputs wrongly taken and is not recovery in respect of (1) non-levied or (2) short levied or (3) non paid or (4) short paid or (5) erroneously refunded duty - excise duty.
In the circumstances, we are unable to hold as a proposition of law that the limitation under Section 11 A will have to read into rule 57 P. The question No.2 is answered accordingly.
Reference is disposed of.
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