COMMISSIONER OF CENTRAL EXCISE, VADODARA versus GUJARAT NARMADA VALLEY FERTILIZERS COMPANY

Citation: [2012] 9 S.C.R. 1100 · Decided: 11-12-2012 · Supreme Court of India · Bench: SWATANTER KUMAR · Disposal: Matter referred to larger bench

Judgment (excerpt)

A 
B 
(2012] 9 S.C.R. 1100 
COMMISSIONER OF CENTRAL EXCISE, VADODARA 
v. 
GUJARAT NARMADA VALLEY FERTILIZERS COMPANY 
LTD. 
(Civil Appeal Nos. 4189-4196 of 2010) 
DECEMBER 11, 2012 
[SWATANTER KUMAR AND MADAN B. LOKUR, JJ.] 
Cenvat Credit Rules, 2002 - r. 12 - Cenvat credit for duty 
C paid inputs used in manufacture of exempted final products 
- Claim for - Whether under the Cenvat Credit Rules, 2002 
an assessee is entitled to claim cenvat credit on duty paid 
Low Sulphur Heavy Stock (LSHS) utilized as an input in the 
manufacture of fertilizer exempt from duty - Question referred 
o to larger Bench - Central Excise Act, 1944 -s. 11 A - Reference 
to larger Bench. 
The assessee had been utilizing cenvat duty paid 
Low Sulphur Heavy Stock (LSHS) as fuel input for 
generating steam. The steam so generated was utilized 
E to generate electricity for the manufacture of fertilizer 
which is exempt from excise duty. According to the 
assessee, it was entitled to claim cenvat credit on the 
input, that is, LSHS even though the end-product fertilizer 
is exempt from excise duty. The Commissioner, Central 
F Excise & Customs, disagreed and issued notices to the 
assessee to show cause why cenvat credit wrongly 
availed by it should not be recovered under Rule 12 of 
the Cenvat Credit Rules, 2002 read with Section 11A of 
the Central Excise Act, 1944. After giving the assessee an 
G opportunity of hearing, the Commissioner confirmed the 
demand of cenvat credit wrongly claimed by the 
assessee. Aggrieved, the assessee preferred appeals 
which were referred to a larger Bench of the Customs, 
H 
1100 
COMMNR. OF CENTRAL EXCISE, VADODARA v. GUJARAT 1101 
NARMADA VALLEY FER. CO. LTD. 
Excise & Service Tax Appellate Tribunal. The larger A 
Bench held that the issue was no longer res integra and 
was fully covered in favour of the assessee by a decision 
of the Tribunal in Gujarat Narmada Fertilizers Co. Ltd. v. 
Commissioner of Central Excise, Vadodara, 2004 (176) 
ELT 200 (Tri. - Mumbai) against which the Revenue's 
B 
appeal before the Gujarat High Court was dismissed. The 
reference made to the larger Bench was then answered 
by holding that the assessee was eligible to cenvat credit 
of duty paid on that quantity of LSHS which was used 
for producing steam and electricity used in turn in relation c 
to manufacture of exempted goods, namely fertilizers. 
Pursuant to the decision of the larger Bench, the 
substantive appeals were placed before a Division Bench 
of the Tribunal. The Division Bench of the Tribunal 
allowed the assessee's appeals relying on the decision 
D 
of the larger Bench of the tribunal. In the meanwhile, the 
Revenue preferred an appeal to this Court against the 
decision of the larger Bench of the Tribunal. By a 
judgment rendered after the impugned order passed by 
the Tribunal, this Court in Commissioner of Central Excise 
E 
v. Gujarat Narmada Fertilizers Company Limited, (2009) 9 
sec 101 set aside the order of the larger Bench and 
decided the issue in favour of the Revenue holding that 
cenvat credit for duty paid inputs used in the 
manufacture of exempted final products is not allowable. 
F 
Thus, when the substantive appeals were taken up for 
consideration by the Division Bench of the Tribunal, the 
decision of this Court in Commissioner of Central Excise 
v. Gujarat Narmada Fertilizers Company Limited, (2009) 9 
sec 101 was not available. It is under these G 
circumstances that the Revenue filed the instant appeals. 
Referring the matter to larger Bench, the Court 
HELD: There is an apparent conflict between an 
earlier decision of this Court in Commissioner of Central 
H 
1102 
SUPREME COURT REPORTS 
[2012] 9 S.C.R. 
A Excise Vadodara v. Gujarat State Fertilizers & Chemicals 
Ltd., [GSFCL] (2008) 15 SCC 46 and the decision in 
Commissioner of Central Excise v. Gujarat Narmada 
Fertilizers Company Limited, (2009) 9 SCC 101. In GSFCL 
a view has been taken that modvat credit can be taken 
B on LSHS used in the manufacture of fertilizer exempt 
from duty. Although this decision was rendered in the 
context of availing modvat credit under the Central Excise 
Rules, 1944 as they existed prior to the promulgation of 
the Cenvat Credit Rules, 2002 the principle of law laid 
c down is general and not specific to the Central Excise 
Rules, 1944. The decision rendered in Gujarat Narmada 
has been rendered in the context of the Cenvat Credit 
Rules, 2002 and is, therefore, more apposite. However, 
since G

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