2012 (10) TMI 230 - AT - Central Excise

Iron ore fines - clearance without payment of duty in terms of exemption Notification No.4/06 - Held that - As decided in RALLIS INDIA LTD. Versus UNION OF INDIA (2008 (12) TMI 46 - HIGH COURT BOMBAY) that liability to pay amount under erstwhile rule 57CC and Rule 6 of Cenvat Credit Rules, 2004, arises only for the final products and not for the waste emerging during the course of the final product. The appellant have set up their unit for production of sponge iron using iron ore as a raw material. In the process of handling, sorting, grading, screening of the raw material and to obtain iron ore of desired size to be used in the kiln, iron are fines (i.e., iron ore of smaller size not usable in the kiln) came into existence, as inevitable product which appellant are selling as waste. The input service (GTA) is used for procurement of raw material and of during processing of such raw material for the purpose of production desired product, i.e., sponge iron, some inevitable waste came into existence, it cannot be said that input service is used in the production of such inevitable by product/waste. As iron ore fines emerge as waste product during the manufacture of final product, it stands rightly held by Commissioner(Appeals) that they do not attract the provisions of Rule 6(3)(b) - in favour of assessee.

Summary

Issues:
1. Whether input service credit is required to be paid for the production of iron ore fines.
2. Whether iron ore fines should be considered as excisable goods attracting duty under Rule 6(3)(b) of the Cenvat Credit Rules.

Analysis:

Issue 1:
The case involved a dispute regarding the payment of input service credit for the production of iron ore fines by the appellant. The Revenue contended that the input service credit should be paid to the extent of 10% as per Rule 6(3)(b) since the iron ore fines were being cleared without payment of duty. However, the Commissioner (Appeals) set aside the demand raised by the original adjudicating authority. The Commissioner relied on legal precedents, including the DCN case and other Supreme Court judgments, to determine whether the production of iron ore fines amounted to manufacturing for the purpose of excise duty. The Commissioner concluded that since the iron ore fines were not a different commercial product from the raw material used and were sold as waste, they did not attract excise duty. The Appellate Tribunal upheld the Commissioner's decision, stating that the iron ore fines were not exempted excisable goods and the input service was not used in the production of such waste, thus Rule 6(2) and 6(3)(b) were not applicable.

Issue 2:
The second issue revolved around whether iron ore fines should be considered as excisable goods attracting duty under Rule 6(3)(b) of the Cenvat Credit Rules. The Revenue argued that since the iron ore fines were manufactured excisable goods, they should be treated as the final product of the appellant, thus attracting the provisions of Rule 6(3)(b). However, the Appellate Tribunal referred to a previous judgment by the Hon'ble High Court in the case of Ralis India Ltd., which held that liability to pay under Rule 6 arises only for the final products and not for waste emerging during the manufacturing process. As the iron ore fines emerged as a waste product during the manufacture of the final product, the Tribunal agreed with the Commissioner (Appeals) that they did not fall under Rule 6(3)(b). Consequently, the Tribunal rejected the Revenue's appeal, upholding the decision of the Commissioner (Appeals).

In conclusion, the Appellate Tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals) decision that the production of iron ore fines did not attract excise duty under Rule 6(3)(b) of the Cenvat Credit Rules.