2012 (8) TMI 377 - AT - Central Excise

Cenvat credit common input used - appellants are manufacturers of sugar, molasses, rectified spirit and carbon-di-oxide - manufacture, press mud and sludge are produced which have been sold by the appellants for some value demand of 10% or 5% as applicable during the relevant period from April 2008 to September 2010 in terms of CENVAT Credit Rule 6(3)(i) Held that - CENVAT credit is also admissible in respect of amounts of inputs contained in any of the waste, residue or by-product. It further states that the basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products - demand of 10% / 5% on press mud and sludge, which are in the nature of by-product and waste and also non-excisable cannot be sustained - appeals are allowed.

Summary

Issues:
Interpretation of CENVAT Credit Rule 6(3)(i) regarding payment on waste and by-products; Classification of press mud and sludge as excisable goods; Application of the definition of 'excisable goods' under Section 2(d) of the Central Excise Tariff Act, 1985.

Analysis:
The case involved a dispute regarding the applicability of CENVAT Credit Rule 6(3)(i) on waste and by-products, specifically press mud and sludge, produced during the manufacturing process of dutiable goods. The Department contended that since common inputs were used, a payment of 10% or 5% was required on the waste and by-products as per the Rule. The appellant argued that such payment should only apply to finished products, citing relevant case laws to support their position.

The Tribunal analyzed the classification of press mud and sludge under Central Excise Tariff Headings and noted that they were not disputed to fall under these classifications. However, the duty specified for these items was nil. The Tribunal referred to the deeming clause in the Explanation to Section 2(d) which considers goods capable of being bought and sold as marketable. Despite being specified in the First Schedule, as they were not subject to excise duty, press mud and sludge could not be classified as excisable goods based on the definition provided.

Regarding CENVAT Credit Rule 6(1) and the definition of 'exempted goods', the Tribunal determined that press mud and sludge fell under this category due to being chargeable at a nil rate of duty. However, considering the nature of these items as waste and by-products, the Tribunal referred to relevant legal precedents and circulars to conclude that the demand for payment of 10% or 5% on these non-excisable items could not be upheld.

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeals, emphasizing that the demand for payment on press mud and sludge as waste and by-products was not sustainable based on legal interpretations and precedents cited during the proceedings.