2018 (2) TMI 1234 - AT - Central Excise

CENVAT credit - by-product - Rule 6(3) of CCR 2004 - Held that - the waste/by-product namely wooden roller wooden baton and firewood arise during the course of cutting of timber logs cannot be subjected to Rule 6(3) of CCR 2004 - Reliance placed in the case of C.C.E. Vs. Anil Products 2013 (10) TMI 798 - GUJARAT HIGH COURT - Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to waste/by-product during the manufacturing process.
2. Classification of wooden roller as a by-product or waste.
3. Interpretation of judgments by the Hon'ble Gujarat High Court and the Hon'ble Supreme Court regarding the applicability of Rule 6(3) of Cenvat Credit Rules, 2004.

Issue 1: Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to waste/by-product during the manufacturing process:

The case involved two Appeals filed by the Revenue and the Assessee against the Order-in-Appeal passed by the Commissioner of Central Excise(Appeals III), Rajkot. The dispute arose from the duty payment on cleared products and the treatment of by-products/waste like saw dust, firewood, and sawn timber, which attracted nil rate of duty. The Assessee availed Cenvat credit on duty paid raw materials, leading to a demand notice under Rule 6(3) of Cenvat Credit Rules, 2004. The ld. Commissioner (Appeals) set aside the demand on most by-products, except wooden roller, which was considered differently.

Issue 2: Classification of wooden roller as a by-product or waste:

The Revenue argued that exempted products like saw dust, firewood, and sawn timber, derived from duty-paid imported wooden logs, should be subject to 6% recovery under Rule 6(3) of the Cenvat Credit Rules, 2004. However, the Assessee contended that wooden roller, identified as peeling waste, was unsuitable for veneer production and only used as fuel. They emphasized that wooden roller was a by-product, not log timber. The judgment considered the nature of wooden roller and its usage to determine its classification.

Issue 3: Interpretation of judgments by the Hon'ble Gujarat High Court and the Hon'ble Supreme Court:

The judgment referred to precedents set by the Hon'ble Gujarat High Court in C.C.E. Vs. Anil Products and the Hon'ble Supreme Court in UOI Vs. Hindustan Zinc Ltd. regarding the application of Rule 6(3) of Cenvat Credit Rules, 2004 to waste/by-products during manufacturing. It was concluded that waste/by-products like wooden roller, wooden baton, and firewood, arising from timber log cutting, should not be subjected to Rule 6(3) of Cenvat Credit Rules, 2004. Consequently, the impugned order was modified, dismissing the Revenue's Appeal and allowing the Assessee's Appeal.

In conclusion, the judgment delved into the intricacies of duty payment on products and the treatment of associated waste/by-products under Rule 6(3) of Cenvat Credit Rules, 2004. It analyzed the nature of wooden roller, considering its manufacturing process and usage, to determine its classification as a by-product. The interpretation of relevant legal precedents by higher courts played a crucial role in shaping the final decision, which favored the Assessee in this case.