2018 (9) TMI 449 - AT - Central Excise

Reversal of Input tax credit - Byproduct - Hydro Carbon Ferro Chrome Slag - exempt goods or not? - Rule 6 of the CENVAT Credit Rules, 2004 - N/N.4/2006-CE - CBEC Circular No. 904/24/2009-CX dated 28/10/2009 - Held that - The issue is no more res-entigra in view of the Circular No. 1027/15/2016-CX dated 25/04/2016 issued by the Central Board of Excise and Customs, New Delhi - It is seen that the earlier Circular No. 904/24/2009-CX (supra) stands withdrawn by the Circular No. 1027/15/2016-CX. In the Circular No. 1027/15/2016-CX, Board has concluded that dross and skimming of non-ferrous metal or any such by-product or waste, which are non-excisable goods are cleared for a consideration from the factory need to be treated as exempted goods for the purpose of reversal of credit of input and input services, in terms of Rule 6 of the CENVAT Credit Rules, 2004. Appeal dismissed - decided against appellant.

Issues:
1. Whether the Appellants are liable to pay Central Excise Duty on the removal of Slag without payment?
2. Whether the Adjudicating Authority's order for recovery, interest, and penalty is justified?
3. Whether the Ld. Commissioner (Appeals) correctly set aside the Adjudication Orders?
4. Whether the Circular No. 904/24/2009-CX is applicable in the present case?
5. Whether the Circular No. 1027/15/2016-CX affects the liability of the Appellants?

Analysis:
1. The Appellants, engaged in manufacturing High Carbon Ferro Chrome, were found to have not paid Central Excise Duty on the removal of Slag. The Adjudicating Authority ordered recovery with interest and penalty. The Respondent contended that the Slag is a byproduct and not a final product, thus not subject to duty. The Tribunal considered Circular No. 1027/15/2016-CX, which clarified the treatment of non-excisable goods as exempted for the purpose of credit reversal, leading to the dismissal of the appeals.

2. The Adjudicating Authority's decision for recovery, interest, and penalty was based on the non-payment of Central Excise Duty on the removed Slag. However, the Ld. Commissioner (Appeals) set aside these orders, leading to the Department's appeal. The Tribunal upheld the Ld. Commissioner's decision based on the non-excisable nature of the Slag and the applicability of Circular No. 1027/15/2016-CX.

3. The Ld. Commissioner (Appeals) overturned the Adjudication Orders and allowed the appeals, prompting the Department to approach the Tribunal. The Ld. DR argued that the Ld. Commissioner did not appreciate the case's facts and merits. However, the Tribunal found in favor of the Respondent based on the non-excisable nature of the Slag and the impact of Circular No. 1027/15/2016-CX.

4. The Adjudicating Authority relied on Circular No. 904/24/2009-CX, which was later superseded by Circular No. 1027/15/2016-CX. The Tribunal noted that the issue was clarified in the latter circular, which addressed the treatment of non-excisable goods as exempted for credit reversal purposes. This clarification influenced the Tribunal's decision to sustain the Ld. Commissioner's order.

5. The impact of Circular No. 1027/15/2016-CX on the liability of the Appellants was crucial in this case. The Circular withdrew previous circulars and instructions, emphasizing the treatment of non-excisable goods as exempted for credit reversal under Rule 6 of the CENVAT Credit Rules, 2004. This circular's effect led to the dismissal of the appeals and the affirmation of the Ld. Commissioner's decision.

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