2018 (7) TMI 239 - AT - Central Excise

CENVAT Credit - common input services which had been used in the manufacture of exempted goods and dutiable goods - non-maintenance of separate records - waste arising out of the course of manufacture - Rule 6 of CCR - Held that - The liability to pay duty under Rule 6 arises only for the final products and not for the waste emerging during the process of manufacture. In the instant case the resultant iron ore fines and coal fines are nothing but waste which cannot be used in the manufacture of sponge iron. The judgment of the Tribunal in the case of Commissioner of Central Excise Raipur Vs. Seleno Steels Ltd. 2013 (3) TMI 258 - CESTAT NEW DELHI is squarely applicable to the facts of this case. In this case the Tribunal had held that emergence of iron ore fines during the process of manufacture did not amount of manufacture and hence the provisions under Rule 6(3) (b) were not attracted. As per Rules 6 (1) and 6(2) of the Rules credit will not be permissible on inputs or input services used for the manufacture of exempted goods or provision of exempted services. Appeal dismissed - decided against Revenue.

Summary

Issues:
- CENVAT Credit on common input services used in the manufacture of exempted and dutiable goods
- Liability under Rule 6 of the CENVAT Credit Rules for waste products
- Applicability of Rule 6(3) of the CENVAT Credit Rules
- Interpretation of the term "manufacture" under Section 2(f) of the Central Excise Act

Analysis:
The case involved an appeal against an order passed by the Commissioner of Central Excise & S. Tax, Jamshedpur, concerning the CENVAT Credit on common input services used in the manufacture of exempted and dutiable goods. The department observed that the appellant had taken credit on such services, leading to a demand notice. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) set it aside, prompting the Revenue to file an appeal.

The Revenue argued that the appellant failed to maintain separate records for inputs used in exempted and dutiable goods, and the ER-1/ER-6 returns did not reflect the removal of exempted goods, suggesting an attempt to conceal information. In response, the appellant contended that certain materials were non-excisable and non-exempted, hence Rule 6 of the CENVAT Credit Rules did not apply. The appellant also disputed the department's view on what constitutes "manufacture."

Upon hearing both sides, the Tribunal examined the case records and noted that the liability under Rule 6 arises only for final products, not waste generated during the manufacturing process. The waste products, iron ore fines, and coal fines, were deemed unusable for manufacturing sponge iron. Additionally, Rule 6(3) of the CENVAT Credit Rules was analyzed, highlighting the formula for calculating the amount attributable to input services used for exempted goods. The Tribunal referenced a previous judgment where it was held that the emergence of waste products during the manufacturing process did not constitute "manufacture," aligning with the current case's circumstances.

Consequently, the Tribunal concluded that the iron ore fines and coal fines were waste products and not subject to Rule 6 of the CENVAT Credit Rules. The order of the Commissioner (Appeals) was upheld, dismissing the appellant's appeal. The judgment emphasized the distinction between final products and waste, clarifying the application of Rule 6 in cases involving manufacturing by-products.