2018 (12) TMI 1104 - AT - Central Excise

CENVAT Credit - excisable or exempt goods? - Whether the iron ore fines as cleared by the appellants can be considered as a separate excisable but exempted commodity? - Held that - The admitted procedure adopted by the appellant in manufacturing his final product i.e. sponge iron is that the appellant procures iron ore as the input for manufacturing sponge iron. The said iron ore lumps of different sizes are first crushed and are then segregated by screening. It is thereafter that requisite sized iron ore /ore lump is feeded in the sponge iron klin. In the aforesaid process of segregation that the iron ore fines are inevitably generated. Thus these fines, cannot be considered as the result of the manufacturing activity of the appellant, since no manufacturing activity is involved for emergence of the same out of iron ore by the appellant. The Department has brought nothing on record to show that the iron ore fines can be considered as exempted goods. Apparently and admittedly, there is no Notification of the Revenue granting exemption to this product. Thus, the embargo created in Rule 6 (3) (b) of CCR will not apply for removal of iron ore fines from the appellant s factory. Confirmation of demand by Commissioner (Appeals) is therefore, held to be not proper and justified. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether iron ore fines cleared by the appellants can be considered as a separate excisable but exempted commodity.

Analysis:
1. Facts and Background: The appellants, engaged in manufacturing sponge iron, faced a demand for recovery of duty on iron ore fines cleared during a specific period. The Department argued that the fines were exempted goods and liable for duty payment under Rule 6 of Cenvat Credit Rules, 2004.

2. Appellant's Argument: The appellant contended that iron ore fines did not undergo a manufacturing process as defined under Rule 2(f) of Central Excise Rules and were not classified as excisable goods. They argued that no exemption notification covered the product, and they were registered for manufacturing sponge iron, not iron ore fines. Thus, they challenged the proposed demand.

3. Department's Argument: The Department maintained that iron ore fines, due to their iron content, were classifiable under the Central Excise Tariff and considered exempted goods. They argued that the appellant should account for dutiable and exempted products or avail cenvat credit as per Rule 6 of CCR, justifying the proposed demand.

4. Adjudication and Decision: The tribunal analyzed the manufacturing process of the appellant and the nature of iron ore fines generated. It referenced legal precedents to determine that the fines did not result from a manufacturing activity and were part of the input, hence not excisable goods. The absence of an exemption notification further supported the finding that the fines were not exempted goods, leading to the dismissal of the proposed demand.

5. Precedent and Conclusion: The tribunal cited a similar case to reinforce its decision, emphasizing that the iron ore fines did not qualify as a separate excisable commodity. By setting aside the order confirming the demand, the tribunal allowed both appeals in favor of the appellant, highlighting the absence of duty liability on the cleared iron ore fines.

This detailed analysis of the judgment showcases the key arguments presented by both parties, the legal interpretation applied by the tribunal, and the final decision rendered in favor of the appellant regarding the classification and duty liability of iron ore fines.