2018 (7) TMI 674 - AT - Central Excise

CENVAT credit - input services - Rule 6(3A) of the Cenvat Credit Rules - effluent sludge which emerges in the Effluent Treatment Plant - N/N. 76/86 -CE.,dated 10.02.1986 - The Revenue has taken a view that the appellant is required to reverse an amount at the rate of 10% and 5% of the value of sludge cleared as per Rule 6(3) of the Cenvat Credit Rules - Held that - The sludge which arises is nothing but a waste, which has arisen in the process of manufacture. The same may be excisable and that is the reason the same was granted exemption vide exemption notification. An identical issue came up before the tribunal in the case of M/s. Magnum 2014 (4) TMI 416 - CESTAT NEW DELHI , which dealt with the sludge formation in Effluent Treatment Plant in respect of the appellants paper manufacturing factory. The Tribunal held that there is no requirement for such reversal. There is no justification for ordering reversal under Rule 6(3) of Cenvat Credit Rules, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is required to reverse an amount under Rule 6(3A) of the Cenvat Credit Rules for clearing effluent sludge without duty payment?
2. Whether the effluent sludge arising in the Effluent Treatment Plant is considered excisable and liable to duty?
3. Whether waste and scrap arising during the manufacturing process are required to be reversed under Rule 6(3) of the Cenvat Credit Rules?

Analysis:

Issue 1:
The appellant, a manufacturer of newsprint and paper, cleared effluent sludge without duty payment under an exemption notification. The Revenue contended that the appellant must reverse an amount under Rule 6(3A) of the Cenvat Credit Rules. The appellant argued that the sludge is waste arising during manufacturing and treatment, hence no reversal is required. The Tribunal noted similar cases where no reversal was mandated for waste like sludge. Consequently, the impugned orders were set aside, and the appeals were allowed.

Issue 2:
The dispute centered on whether the effluent sludge from the manufacturing process was excisable and dutiable. The Revenue argued that the sludge should be considered a manufactured product, liable for duty exemption. However, the Tribunal found that the sludge was waste arising in the manufacturing process, exempted under a notification. Relying on precedents, the Tribunal concluded that no reversal was necessary under Rule 6(3).

Issue 3:
The Revenue contended that waste and scrap should be treated as a by-product of manufacturing, necessitating reversal under Rule 6(3). The appellant argued against this, citing case law supporting their position. The Tribunal referenced past decisions where it was held that waste, like sludge, was not subject to reversal under the Cenvat Credit Rules. By following these precedents, the Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals.