2018 (10) TMI 529 - AT - Central Excise

CENVAT Credit - applicability of rule 6(3) of CCR 2004 - iron ore fines gets generated during the course of manufacture which is a waste product but it has marketable value - Held that - There is no dispute on the facts of the case that the demand is on reversal of CENVAT credit under rule 6(3) for the value of iron ore fines generated by the appellant during the process of manufacture of final products viz; Sponge iron - On the very same issue in the case of Maa Mangla Ispat Pvt. Ltd. 2013 (5) TMI 268 - CESTAT NEW DELHI , the Principal Bench of CESTAT has decided that Rule 6(3) of CCR 2004 does not apply because iron ore fines are not manufactured let alone being exempted - the first appellate authority has not considered this aspect at all. It is a fit case to be remanded back to the first appellate authority to examine the issue on merits and also on limitation - Appeal allowed by way of remand.

Summary

Issues:
1. Liability to reverse CENVAT credit under rule 6(3) for the value of iron ore fines generated during the manufacturing process.
2. Imposition of penalty on the appellant.
3. Consideration of limitation period for contesting the demand.

Analysis:

Issue 1: Liability to reverse CENVAT credit for iron ore fines
The appellant, a Public Sector Undertaking manufacturing sponge iron, was asked to reverse CENVAT credit under rule 6(3) of CCR 2004 for the value of iron ore fines generated during the manufacturing process. The appellant initially reversed an amount of about ?10.00 lakhs but was later required to reverse an additional amount of about ?11.00 lakhs. The appellant contested this demand on both merits and limitation before the first appellate authority. The appellant argued that iron ore fines were not a manufactured product and hence Rule 6(3) did not apply, citing relevant case laws. The first appellate authority, however, only considered the aspect of penalty and did not examine the appellant's contention on merits. The Tribunal found that the first appellate authority failed to consider the issue of whether Rule 6(3) applied to iron ore fines, as established in previous decisions, and remanded the case for further examination on merits.

Issue 2: Imposition of penalty
The appellant contested the imposition of penalty, claiming that as a Public Sector Undertaking, they had no intention of evading duty or irregularly availing CENVAT credit. The appellant argued that they could not be alleged to have illegally gained any amount and thus the extended period of limitation could not be sustained. However, the first appellate authority did not address the appellant's arguments on the merits of the duty reversal under Rule 6(3) but focused solely on the penalty aspect. The Tribunal did not delve into the penalty issue as the primary concern was the liability to reverse CENVAT credit for iron ore fines.

Issue 3: Consideration of limitation period
The Departmental Representative pointed out that while the appellant contested the liability before the first appellate authority, the authority did not record any findings on this aspect. Consequently, the matter was recommended to be remanded back to the first appellate authority for a thorough examination of the liability to reverse CENVAT credit for iron ore fines in light of relevant case laws and to consider the limitation period for contesting the demand.

In conclusion, the Tribunal allowed the appeal by way of remand, directing the first appellate authority to reexamine the issues of liability to reverse CENVAT credit for iron ore fines and the limitation period for contesting the demand in accordance with established legal precedents.