The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) observed that following rescinded Excise Circular by Commissioner ( Appeals ) is condemnable act of judicial indiscipline.
The appellant in the present case is engaged in manufacture of G.I. wire, barbed wire etc. During the scrutiny of returns of the appellant during the period April, 2016 to June, 2017, Department observed that the appellant has, apart from the manufacturing dutiable goods has also cleared zinc dross, the exempted goods. With these observations, the appellant was proposed to have paid duty to an amount equivalent to 6% of the value of non-excisable/exempted goods in terms of Rule 6 (1) read with Rule 6 (3) of Cenvat Credit Rules, 2004.
Based on those observations a Show Cause Notice No.29 dated 26.05.2020 was served upon the appellant proposing a demand of Rs.4,78,599/- to be recovered from the appellant along with the proportionate interest and the appropriate penalties. The proposal was initially confirmed vide Order-in-Original No. 10/21-22 dated 07.03.2022. The appeal against the said order has been rejected vide the Order-in-Appeal No.22-2023-24 dated 26.04.2023. Still being aggrieved, the appellant is before the Tribunal.
The Counsel for the appellant has mentioned that the order under challenge has been passed by mis-interpreting the basic provisions of “Cenvat Credit Rules, 2004” ( CCR ) and sub rule 6(3) of CCR, 2004. The Explanation (1) was added to Rule 6(1) of CCR, 2004 with effect from 01.03.2015. The same cannot be applied in respect of zinc/ dross/ash/ waste cleared by the appellant for the reason that sub-rule (1) of Rule 6 has not been amended so as to make the zinc dross/ ash residue emerging out of manufacture of dutiable goods.
The zinc dross originates automatically during the galvanization process used by the appellant in the manufacture of its final product. The counsel has mentioned that the Circular No.1027/15/2016 dated 25th April, 2016 has wrongly been relied upon by the adjudicating authority despite that the said Circular stands already rescinded by the decision of the Supreme Court and has in fact being withdrawn by the Department by their subsequent Circular No.1084/05/2022 dated 07.07.2022.
The D.R. has mentioned that the zinc dross cleared by the appellant is a product manufactured by the appellant as it emerges in the process of the manufacture of final product by the appellant. It was also mentioned that subsequent to the decision of the Supreme Court in the case of Union of India vs. M/s. DSCL Sugar Ltd.
A Single Bench of Dr Rachna Gupta, Judicial Member observed that “Circular dated 25.04.2016 was held unsustainable in law. Subsequent to the said decision that Department also came up with another Circular No.1084/2005 dated 07.07.2022 rescinding the Circular of 25.04.2016 in the light of decisions of the Supreme Court. Commissioner (Appeals) in the present case is observed to still have followed the said rescinded Circular dated 25.04.2016. The said act of the adjudicating authority not merely amounts to mis-interpretation of the provision, but it amounts to the violation of statutory principles, the circular dated 07.07.2022 being binding upon him. The ignorance of law laid down by the Hon’ble Supreme Court is a condemnable act of judicial indiscipline.”
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