2015 (4) TMI 1035 - AT - Central Excise

Benefit of CENVAT Credit - exemption vide Notification No. 3/2005 dated 24.02.2005 - Held that - What 57D provides is that where MODVAT input is used in the manufacture of dutiable final product and waste refuse or by-product arise in the process then even if the MODVAT inputs are contained in the waste refuse or by-product and whether or not Excise duty is payable on such waste refuse or by-product the manufacturer would not be denied full credit of duty paid on inputs used in the manufacture of dutiable final products. Rule 57CC applies only if the MODVAT inputs are used in manufacture of both dutiable final products and exempted final products and the manufacturer has not maintained separate accounts so as to ascertain the quantum of inputs used in the manufacture of the final products. Therefore the floor sweepings/waste and scrap/hydrogen arising in the manufacture of biscuits/iron-products/oxygen respectively will be governed by Rule 57CC if they are exempted final products and would be governed by Rule 57D if they are merely waste refuse or by-product arising in the manufacture of dutiable final products and accordingly the Hon ble Bombay High Court allowed the writ petition of Rallis India Limited (2006 (12) TMI 162 - CESTAT MUMBAI) holding that no duty whatsoever is payable in the case of by-products waste and scrap. - in the present case also sawdust generated is waste and not a final product of the appellant. Accordingly I hold that no duty is payable under the provisions of Rule 6(3)(b) of the CENVAT Credit Rules 2004 or in the earlier provisions of rule 57CC of the Central Excise Rules 1944. Accordingly the appeal is allowed. The appellant will be entitled to consequential benefit if any. - Decided in favour of assessee.

Summary

Issues: Determination of duty payment on sawdust generated during manufacturing process and applicability of CENVAT credit rules.

Analysis:
1. Issue of Duty Payment on Sawdust:
The appellant, engaged in manufacturing particle board and pre-laminated board, generated sawdust during the process. The Revenue contended that sawdust, an exempted product, required duty payment as the appellant availed CENVAT credit on inputs used for both dutiable and exempted goods. The Revenue invoked Rule 6(2) and 6(3) of the CENVAT Credit Rules, 2002 and 2004, respectively. The show cause notice demanded payment of duty, penalty, and interest for the period from November 2001 to May 2006. The Joint Commissioner upheld the demand, relying on a Tribunal ruling regarding payment on by-products. The Commissioner (Appeals) affirmed the decision, stating that Rule 6(3)(b) should apply due to the common inputs used for dutiable and exempted goods.

2. Applicability of CENVAT Credit Rules:
The appellant appealed to the Tribunal, arguing that sawdust is waste and not a final product, hence not subject to duty payment under Rule 6(3). The appellant cited a Division Bench ruling and a High Court case where similar waste products were not considered final products, thus exempt from payment. The appellant referred to conflicting views in previous decisions and highlighted the distinction between by-products and final products. The Tribunal, considering the nature of sawdust as waste, ruled in favor of the appellant, stating that no duty is payable under Rule 6(3)(b) or the earlier Rule 57CC.

3. Judgment and Conclusion:
The Tribunal allowed the appeal, emphasizing that sawdust is waste and not a final product, thus exempt from duty payment under CENVAT credit rules. The appellant was granted consequential benefits, and a miscellaneous application for amendment in the cause title was also allowed. The judgment clarified the distinction between waste products and final products, providing a detailed analysis of relevant legal precedents and rulings to support the decision.

This comprehensive analysis of the judgment highlights the key issues, legal interpretations, and the final decision rendered by the Tribunal in the case.