- (1.) This appeal has been preferred by the appellant against the order dated 5th April, 2007 passed by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (hereinafter referred to as CESTAT) whereby the Tribunal allowed the appeal filed by the respondent and set aside the order dated 31st December, 2003 passed by the Commissioner, Central Excise (Appeals), Kolkata, confirming the adjudication order dated 4th December, 2000 passed by the Assistant Commissioner of Central Excise, Chandannagar Division. The appeal was admitted to decide the following question of law : (1) "Whether the respondent is entitled to avail Modvat credit on the input in the manufacture of final product on the part of which no duty is paid as supplied under Chapter X Procedure without maintaining separate inventory".
(2.) The input involved in the instant case is Light Diesel Oil (hereinafter referred to as LDO) which was used by the respondent in generation of electricity by diesel generating sets of the respondents factory which electricity in turn was used for manufacture of various final products like Viscose Rayon Yarn and Sulphuric Acid in the respondent's factory situated at Naya Sarai, Hooghly, West Bengal (in short the factory) during the period from 1st February, 1999 to 31st August, 1999. The respondent availed (MODVAT credit) now known as (CENVAT credit) of the duty of excise paid on the said input material. LDO, in accordance with the provisions of the erstwhile Central Excise Rules, 1944. The respondent cleared upon manufacture, inter alia , Viscose Rayon Yarn upon payment of duty of excise payable thereon. Part of Sulphuric Acid manufactured at the factory, however, was cleared during the said period without payment of duty in terms of Notification No. 5/99-C.E., dated February 28, 1999 by following the procedure laid down in Chapter X of the said Rules. It is submitted by the learned Advocate for the appellant that the respondent used LDO in the material period in running generators to generate electricity in the manufacture of both Viscose Rayon Yarn and Sulphuric Acid and the Sulphuric Acid was removed from the said factory under Chapter X Procedure without payment of duty. The respondent claimed MODVAT credit of the specified duty on the LDO as an input used in or in relation to the manufacture of both the categories of final products without having maintained separate inventory necessary under Rule 59CC(9) of the Central Excise Rules, 1944. Since the contention of the respondent was not accepted by the department the department demanded short paid Central Excise duty of a sum of Rs. 4,82,904/- being equal to 8% of the price of 10.74 M/Tons of Sulphuric Acid removed from the said factory under Chapter X Procedure without payment of duty. The order of the Assistant Commissioner dated 4th December, 2000 was challenged by the respondent but it was upheld by the Commissioner of Central Excise (Appeals) IV, Kolkata by his order dated 31st December, 2003. Against that the respondent preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (CESTAT).
(3.) Mr. Arindam Sinha, learned Advocate appearing for the appellant drawing our attention to the order dated 5th April, 2007 passed by the Tribunal submitted that the Tribunal relying upon the judgment ( Central Cables Limited V/s. CCE,2006 196 ELT 157) and the ratio of the decision of the Supreme Court in ( Escorts Limited V/s. Commissioner of Central Excise, 2004 171 ELT 145) came to a conclusion that after applying the ratio of the judgment the credit was not deniable to the appellant in respect of Sulphuric Acid supplied duty free under Chapter X Procedure without payment of duty. Accordingly the Tribunal set aside the order passed by the Commissioner. According to Mr. Sinha the said decisions are not in regard to the requirement of separate inventory imposed by Sub-Rule (9) of Rule 57CC of the said Rules. Such questions were not raised or decided upon in those decisions and therefore those decisions cannot be applied in the instant case. According to the appellant Sub-Rule (1) and (9) exempt maintenance of separate inventory only in case of input used as fuel. Rule 57B of the said Rules gives the definition of different categories of inputs. Rule 57B(i)(iii) and (iv), inter alia, defines two categories of inputs as reproduced below : "Rule 57B(i)(iii) - inputs used as fuel; Rule 57(i)(iv) - inputs used for generation of electricity or steam, used for manufacture of final products or for any other purpose, within the factory of production.";