2016 (6) TMI 871 - AT - Central Excise

Cenvat Credit - Common inputs - emergence of exempted waste - Commissioner took the view that they are required to pay an amount at the rate of 10% / 5% of the value of exempted goods (coke fines) under Rule 6(3)(b) of the Cenvat Credit Rules 2004. - For carrying on the manufacturing operations, they manufactured coking coal as an intermediate product which is used to heat up blast furnace in their factory. Since coke so manufactured comes into existence in bigger sizes, they put it through a coke cutter, to reduce the size to that which is suitable for use in the blast furnace. During this process, coke fines (Coke dust) gets generated which are cleared from the factory without payment of excise duty following exemption notification no. 4/2006-CE dated 01.03.2006. Held that - though coke fines arise during the course of manufacture of the final products and are exempted, this cannot be considered as an exempted final product but are having the colour of process waste. In the light of the discussions above, when inputs are contained in waste it will not attract the mischief of Rule 6(3)(b) of Cenvat Credit and there will be no requirement of paying 10% / 5% of the value of the exempted product. - Decided in favor of assessee.

Issues: Determination of liability under Rule 6(3)(b) of the Cenvat Credit Rules 2004 for payment of exempted goods; Classification of coke fines as exempted final product or process waste.

Analysis:
1. The appellant, a manufacturer of iron and steel products, challenged the Commissioner's order confirming a demand of a specific amount under Rule 6(3)(b) of the Cenvat Credit Rules 2004.
2. The main contention was regarding the treatment of coke fines, a by-product generated during the manufacturing process, as exempted final product or process waste.
3. The appellant argued that since coke fines are not the final product but a by-product arising during the manufacturing process, they should not be liable to pay 10% of the value of exempted goods under Rule 6(3)(b).
4. The appellant relied on past decisions, including a Circular by CBEC and judgments by the Tribunal and Supreme Court, supporting the admissibility of Cenvat credit on inputs contained in waste or by-products arising during manufacturing.
5. The Advocate for the appellant emphasized that the issue had been settled in their favor based on previous legal precedents and interpretations.
6. On the other hand, the Departmental Representative reiterated the view taken in the original order by the Commissioner.
7. The central dispute revolved around whether coke fines should be considered as exempted final products or process waste, given that they arise during the manufacturing of finished products.
8. The Tribunal referred to a previous decision by its Larger Bench and subsequent judicial interpretations, including a ruling by the Supreme Court, which emphasized the distinction between final products and by-products in the context of Cenvat credit rules.
9. After analyzing the legal provisions and precedents, the Tribunal concluded that coke fines, being process waste and not exempted final products, do not attract the provisions of Rule 6(3)(b) of the Cenvat Credit Rules, thereby absolving the appellant from the requirement of paying a percentage of the value of exempted products.
10. Consequently, the appeal was allowed in favor of the appellant based on the interpretation of the legal provisions and relevant case law.

This detailed analysis of the judgment outlines the key legal arguments, precedents, and the Tribunal's reasoning in determining the liability under Rule 6(3)(b) of the Cenvat Credit Rules 2004 regarding the payment for exempted goods, specifically focusing on the classification of coke fines as either exempted final products or process waste.

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