2017 (1) TMI 1516 - AT - Central Excise

CENVAT credit - manufacture of taxable as well as exempt goods - waste - chhilka, dundli, bhushi and sprout - Rule 6(3) of the Rules - Held that - the Tribunal relying upon the decisions of the Bombay High Court in Hindalco Industries Limited vs. Union of India, 2014 (12) TMI 657 - BOMBAY HIGH COURT held that for the by-products i.e. chhilka, dhundli, bhushi and sprout emerging during the manufacturing of malt and malt extract, the assessee is not liable to pay 10% of the value of the said goods - appeal allowed - decided in favor of Revenue.

Summary

Issues:
- Whether the appellant is liable to pay 10% of the value of exempted goods cleared by them under Rule 6(3) of the Cenvat Credit Rules, 2004.

Analysis:
The appellant, engaged in manufacturing Malt and Malt extract, availed Cenvat Credit on inputs, capital goods, and input services. The Revenue contended that since the appellant manufactured both dutiable and exempted final products, they must pay 10% of the value of exempted goods as per Rule 6(3) of the Cenvat Credit Rules, 2004. A show cause notice was adjudicated, confirming the demand along with interest and equivalent penalty. The appellant challenged this order.

The appellant's counsel relied on judgments of the Hon'ble High Court of Bombay and Allahabad in similar cases to argue that they are not liable to pay 10% of the value of waste generated during manufacturing. The Ld. Commissioner (Appeals) had also ceased proceedings against the appellant in a subsequent period. The Revenue reiterated the findings of the impugned order.

After hearing both parties, the Tribunal noted that the issue had been settled by the Hon'ble High Courts of Bombay and Allahabad in relevant cases. The Tribunal held that waste products like chhilka, dundli, bhushi, and sprout emerging during the manufacturing of Malt & Malt extract do not attract the requirement to pay 10% of their value. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

Therefore, the Tribunal's decision was in favor of the appellant, based on the settled legal position established by the High Courts, leading to the setting aside of the demand for payment of 10% of the value of exempted goods.