2006 (6) TMI 308 - AT - Central Excise

Summary

Issues:
- Applicability of Rule 6(3) of Cenvat Credit Rules on clearance of non-granulated slag
- Classification of non-granulated slag as excisable goods
- Interpretation of judicial decisions regarding slag as excisable goods
- Admissibility of Cenvat credit on waste or by-products

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore concerned the clearance of non-granulated slag by an appellant manufacturing steel. The Revenue contended that the appellant was liable to pay 8% of the sale value of the non-granulated slag as per Rule 6(3) of Cenvat Credit Rules, 2002. The lower authority demanded payment under the said rules, imposed a penalty, and demanded interest. The appellant challenged this order, arguing that non-granulated slag is a by-product and waste, not excisable goods, thus Rule 6 is inapplicable. The appellant also cited previous decisions where granulated slag was deemed non-excisable, and the Revenue itself held non-granulated slag as waste for a subsequent period. The appellant emphasized that various judicial decisions supported non-taxability of slag. They further argued that even if non-granulated slag was excisable, Cenvat credit should be admissible based on CBEC's circular. The Revenue reiterated the Order-in-Appeal.

Upon careful review, the Tribunal found that non-granulated slag, being a by-product in steel manufacture, is not a final product and can be considered as waste or by-product. Referring to the Board's circular, the Tribunal clarified that Cenvat credit is admissible on inputs contained in waste or by-products used in manufacturing final products. Additionally, the Tribunal noted that the Revenue itself classified non-granulated slag as non-excisable for a subsequent period. Considering these factors, the Tribunal concluded that the impugned Order-in-Appeal lacked merit, and thus allowed the appeal with consequential relief. The judgment emphasized the admissibility of Cenvat credit on waste or by-products and the non-excisability of non-granulated slag, leading to a favorable decision for the appellant.