2015 (12) TMI 1445 - AT - Central Excise

Reversal of cenvat credit - some iron ore fine or smaller pieces of iron ore emerge which are not usable for further manufacture of sponge iron. Therefore, same were cleared without payment of duty - duty on 10% of the value of exempted goods cleared by the respondents - Held that - As the facts of the cases in hand are identical to the facts of the case in Maa Mangla Ispat Pvt.Ltd. (2013 (5) TMI 268 - CESTAT NEW DELHI), and after examining the impugned order, in the light of the decision in the case of Maa Mangla Ispat Pvt.Ltd. (supra), I do not find any infirmity in the impugned order, the same is upheld. - Decided against Revenue.

Summary

Issues:
- Appeal against adjudication order demanding duty on exempted goods
- Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004
- Maintaining separate account for dutiable and exempted goods
- Application of Rule 6(3) in case of manufacturing by-products
- Comparison with precedent case law

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI involved a dispute regarding the demand for duty on exempted goods cleared by the respondent. The Revenue contended that the learned Commissioner (Appeals) erred in setting aside the adjudication order. The core issue revolved around the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004. The respondent, engaged in manufacturing sponge iron, cleared iron ore fine without duty payment, leading to the demand for 10% of the value of exempted goods. The Revenue argued that since the respondents did not maintain separate accounts for dutiable and exempted final products, they were liable to pay the specified amount.

On the contrary, the respondents argued that Rule 6(3) did not apply as they were not the manufacturers of iron ore fine but of sponge iron. They contended that the iron ore fine was a by-product emerging during the manufacturing process and, therefore, not subject to the same obligations. The Tribunal referred to the precedent case of Maa Mangla Ispat Pvt.Ltd., where it was established that Rule 6(3) is applicable when a manufacturer consciously produces both excisable and fully exempted products using common inputs. The Tribunal emphasized that if compliance with Rule 6(2) was impossible due to the nature of the by-product, Rule 6(3) would not be triggered.

After considering the arguments and the precedent case law, the Tribunal upheld the decision of the learned Commissioner (Appeals). It concluded that since the facts of the present case mirrored those of Maa Mangla Ispat Pvt.Ltd., where the exempted final product emerged as an unavoidable waste, Rule 6(3) was not applicable. Therefore, the impugned order was upheld, and the Revenue's appeals were dismissed. The judgment highlighted the importance of distinguishing between dutiable goods and by-products in the application of Cenvat Credit Rules to ensure fair and accurate duty assessments.