2015 (10) TMI 1149 - AT - Central Excise

Cenvat credit - by-products - whether amount of 10% of the value of Slag payable in terms of Rules 6(3)(i) of Cenvat Credit Rules, 2004 - Held that - Fact of the case is not under dispute that goods is slag arising out of the manufacturing of final product i.e. Alloys and Non-alloy Cast and Rolls. This slag arises unavoidably during the course of manufacture. Therefore slag is nothing but waste - Above para of instruction manual provides that Cenvat Credit is admissible even in respect of input contained in any waste, refuse or by-product. Therefore demand under Rule 6(3)(i) of Cenvat Credit Rules is not maintainable. This issue was time and again considered in various judgment and finally Hon ble Supreme Court in the case of Hindustan Zinc Ltd. (2014 (5) TMI 253 - SUPREME COURT) held that demand under Rule 6(3)(i) is not sustainable in respect of waste, by product, refuse cleared without payment of duty. In view of the above settled legal position, I am of the considered view that demand of 10% of the value of Slag cleared by the appellant under NIL rate of duty is not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Whether the demand of 10% of the value of slag payable under Rule 6(3)(i) of Cenvat Credit Rules, 2004 is justified.

Analysis:
The appeal was against an order passed by the Commissioner of Central Excise upholding a demand for payment of duty on slag cleared without payment. The appellant, engaged in manufacturing excisable goods, argued that the 10% demand under Rule 6(3)(i) of Cenvat Credit Rules, 2004 was not applicable to waste material like slag. The appellant cited various judgments, including UOI vs. Hindustan Zinc Ltd., Rallis India Ltd. vs. UOI, and Cadbury India Ltd. vs. CCE, to support their claim.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order. The Tribunal, after considering both sides' submissions and the record, analyzed the issue of whether the 10% demand on the value of slag was justifiable. It was noted that the slag arising during manufacturing was waste material and, as per Chapter 5 of CBEC's Excise Manual, Cenvat Credit is admissible for inputs contained in waste, refuse, or by-product. The Tribunal referred to the instruction manual which clarified that Cenvat Credit is allowed for inputs in any waste or by-product, even if the final product is exempt from duty.

Based on the legal position established in various judgments, including the Hindustan Zinc Ltd. case, the Tribunal concluded that the demand under Rule 6(3)(i) of Cenvat Credit Rules was not sustainable for waste materials like slag cleared without payment of duty. Consequently, the impugned order was set aside, and the appeal was allowed.