2006 (2) TMI 642 - AT - Central Excise

Summary

Issues:
1. Challenge to order of Commissioner of Central Excise regarding classification of exempted by-products.
2. Interpretation of Rule 6(3)(b) of CENVAT Credit Rules, 2002.
3. Treatment of disputed products as by-products or final products.
4. Consideration of by-products for CENVAT credit.
5. Distinction between exempted by-products and dutiable final products under CENVAT Credit Rules.

Issue 1: Challenge to Commissioner's Order
The appellants contested the Commissioner's decision that exempted by-products emerging during the manufacture of refined oil should be considered final products subject to payment under Rule 6(3)(b) of CENVAT Credit Rules, 2002. The Commissioner held that even though the goods were by-products, they were cleared, purchased, and sold as final products, thus attracting the 8% charge.

Issue 2: Interpretation of Rule 6(3)(b)
The appellants argued that the disputed products were not intended final products but incidental in the manufacturing process of refined edible oil. They emphasized that the goods should be treated as by-products and not as final products as per Rule 6(3)(b) provisions.

Issue 3: Treatment of Disputed Products
The Revenue representative contended that Rule 6 did not explicitly accommodate by-products and all products arising from the manufacturing process should be treated as final products, regardless of being referred to as by-products. The argument centered on the lack of distinction between final products and by-products under the Rule.

Issue 4: CENVAT Credit for By-Products
The appellants relied on CBEC instructions and case laws to support their claim for CENVAT credit for inputs used in the manufacturing of exempted by-products. They argued that the credit should be allowed as long as inputs were used in or in relation to the manufacture of final products, directly or indirectly.

Issue 5: Distinction Between Exempted By-Products and Dutiable Final Products
The Tribunal, considering CBEC instructions and precedents, concluded that a distinction could be made between final products and by-products. Relying on previous case law, the Tribunal allowed credit for inputs consumed in the manufacturing of by-products, which were incidental to the production of the main duty-paying product, refined edible oil. The impugned order was set aside, and the appeal was allowed.