ORDER
V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise, Kochi. Under the impugned order the lower authority has decided three issues against the appellants (i) eligibility to the money credit relatable to the by-product manufactured by the appellants in respect of Neem oil used in terms of Notification 46/89 dated 11-10-1989 issued in terms of Rule 57K of the Central Excise Rules, 1944, (ii) manufacture of goods without licence and (iii) clearance of the goods without approval of classification list. The learned lower authority has also confiscated the neem antifeedant and allowed the same to be redeemed on payment of fine of Rs. 10,000/-. A penalty of Rs. 5,000/- has also been imposed on the appellants for violation of Rule 173Q of the Central Excise Rules, 1944.
2. Shri J.B. Koshy, the learned Counsel for the appellants pleading in regard to the money credit scheme relatable to the quantity of neem antifeedant produced from Neem oil, pleaded that neem oil contains gummy material which ultimately does not form part of the soap which is manufactured in the appellants’ factory and gets removed during the process of filteration and the oil from which the neem antifeedant is removed continues to be a minor oil. He pleaded that since the appellants had subsequently found that the gummy materials contained in the neem oil can be used as pesticides they removed the gummy materials from the neem oil before it is used in the manufacture of soap. He pleaded that in this background so far as the benefit of Notification issued under Rule 57K is concerned, whether the gummy material is removed during the process of manufacture of soap or after it is extracted from the neem oil in the beginning is immaterial when the fact remains that neem oil has been used in the manufacture of soap. He, therefore, prayed for extending the benefit of the money credit scheme denied to the appellants. He pleaded that there is nothing in the order of the learned lower authority to show as to how the lower authority has denied the benefit, when neem oil as such has been used in the manufacture of soap.
3. In regard to the manufacture of neem antifeedant without applying for a Central Excise Licence and its clearance without approval of the classification list, he pleaded that the appellants had filed classification list on 8-1-1991. He pleaded that this classification list was approved by the Department provisionally. In regard to the date on which they applied for the licence, the learned Counsel pleaded that he is not able to say as to the date of approval to the classification list provisionally. He pleaded that the goods have been seized on 15-2-1991 and by this time the appellants had already made a number of clearances and it should be presumed that they had applied for the licence and the classification list had been approved by them. However, he is not able to produce any evidence in regard to the date of application for licence and also provisional approval of the classification list.
4. Shri P.R. Prasad, the learned SDR pleaded that the appellants have admittedly manufactured two products viz., neem antifeedant to be used as pesticides and also soap and the gummy substance used as neem antifeedant has been removed before the manufacture of soap and not during the process of manufacture of soap and for that reason the appellants have been rightly denied the benefit of the money credit scheme in respect of the goods manufactured by them. In regard to the manufacture of the goods without a licence and clearance of the same without approval of the classification list, he pleaded that the appellants have not put forth any evidence to substantiate their plea regarding manufacture of the goods after their application for licence and also that clearances have been effected after approval to the classification list. He, therefore, pleaded that the lower authority’s order is maintainable in law.
5. I have considered the pleas made both the sides. In regard to the benefit of the money credit scheme, I observe that the same is allowed in terms of Rule 57K read with Rule 57M of the Central Excise Rules. Rule 57M is reproduced below for convenience of reference :
Credit not to be denied or varied in certain circumstances.
(1) Credit of money in respect of any inputs shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse or byproduct arising during the manufacture of the final products, whether or not such waste, refuse or by-product is exempted from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty or is not specified as final product; and
(2) Credits of money allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate product has come into existence during the course of manufacture of the final products and that such intermediate products are for the time being exempted from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty:
Provided that such intermediate products are used within the factory of production in the manufacture of final products on which duty of excise is leviable whether in whole or in part.
6. I observe that the gummy substance forms part of the neem oil and the same gets removed as it is during the process of the manufacture of the soap as pleaded and there is no plea contra, and the removal of the gummy substance therefrom, appears to be a technical necessity and it does not matter if it is removed before or during the process of manufacture of soap. Inasmuch as the gummy substance has to be removed from the neem oil for the manufacture of the final product viz. soap, in view of the above, I hold that in terms of Rule 57M, the benefit of money credit has been wrongly denied to the appellants by the lower authority. I, therefore set aside that part of the order of the lower authority in this regard and hold that the appellants would be eligible to the money credit scheme.
7. In regard to the manufacture of neem antifeedant the lower authority has held that no evidence has been produced in regard to application for licence for the manufacture of the same. The appellants have also not produced any evidence in regard to approval to the classification list for clearance of the goods. In view of the above, the Ld. lower authority’s action for violations of the provisions of Rule 174 read with Rule 173Q of the Central Excise Rules, 1944 is maintainable in law.
8. Taking into consideration the facts and circumstances, I hold that so far as the redemption fine of Rs. 10,000/- is concerned, the same cannot be considered as excessive and I confirm the same. However, I hold that ends of justice would be served if the penalty is reduced to Rs. 3,000/- (Rupees Three thousand). Except for the above modifications, the appeal is otherwise dismissed.