2018 (2) TMI 1312 - AT - Central Excise

CENVAT credit - by-product - inputs used in the manufacture of dutiable goods and exempted goods - non-maintenance of separate records - case od appellant is that by-products which emerge during the course of manufacture of finished goods cannot be subjected to Rule 6(3) of CCR 2004 - Held that - As far as applicability of Rule 6(3) to the by-product, the issue is covered by the judgment of Hon ble Gujarat High Court in the case of Sterling Gelatine s case 2010 (9) TMI 857 - GUJARAT HIGH COURT , where it was held that when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal filed by Revenue and assessee against the same order-in-appeal by Commissioner of Central Excise (Appeals-I), Rajkot.
- Whether by-products emerging during the manufacture of finished goods are subject to Rule 6(3) of Cenvat Credit Rules, 2004.
- Applicability of Rule 6(3) to wooden rollers and other by-products.
- Interpretation of the judgment of Hon'ble Gujarat High Court in the case of Commissioner of Central Excise and Customs Vadodara-I vs Sterling Gelatine 2011 (270) ELT 200 (Guj.).

Analysis:
1. The appeals were filed by both the Revenue and the assessee against the same order-in-appeal by the Commissioner of Central Excise (Appeals-I), Rajkot. The issue at hand revolved around the treatment of by-products emerging during the manufacturing process of finished goods concerning Rule 6(3) of Cenvat Credit Rules, 2004. The appellant had used common input, wooden logs, on which cenvat credit of SAD was availed, in the manufacture of finished and exempted goods without maintaining separate records for consumption of inputs. This led to a demand notice for recovery, which was confirmed with interest and penalty upon adjudication.

2. The appellant contended that the by-products such as wooden rollers emerging during the manufacturing process cannot be subjected to Rule 6(3) of Cenvat Credit Rules, 2004. Reference was made to a judgment of the Hon'ble Gujarat High Court to support this argument. The Revenue, on the other hand, argued that since these by-products had commercial value and emerged during the manufacturing process, they should be subject to Rule 6(3). The key contention was whether by-products like wooden rollers should fall under the purview of Rule 6(3) as a distinct product.

3. The Tribunal analyzed the impugned order and the arguments presented. Referring to the judgment of the Hon'ble Gujarat High Court in the case of Sterling Gelatine, the Tribunal concluded that by-products emerging during the manufacturing process of finished goods are not subject to Rule 6(3) of Cenvat Credit Rules, 2004. The Tribunal found no merit in confirming the demand on wooden rollers and dismissed the Revenue's appeal while allowing the assessee's appeal concerning the treatment of other emerging by-products as waste products. The principles laid down in the aforementioned case were applied to decide the issue at hand.

4. In summary, the Tribunal ruled in favor of the assessee, allowing their appeal and dismissing the Revenue's appeal. The judgment highlighted the distinction between by-products emerging during the manufacturing process and the applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to such products. The decision was based on the interpretation of relevant legal provisions and precedents set by the Hon'ble Gujarat High Court, providing clarity on the treatment of these emerging by-products in the context of excisable goods manufacturing.