2019 (7) TMI 482 - AT - Central Excise

CENVAT Credit - waste/exempt goods - Fly Ash/Coal Ash - waste emerging on burning of coal for generation of electricity in the captive Thermal Power Plant - reversal of credit at the specified rate, read with Rule 6(3)(i) of the Cenvat Credit Rules - HELD THAT - The Fly Ash/Coal Ash is the residual waste and not a manufactured product emerging during the course of generation of electricity. Thus, in absence of being a manufactured product, the same is not excisable and there is thus no excise duty attracted, nor any reversal of duty under Rule 6(3) of Cenvat Credit Rules, 2004 is warranted. Reliance placed in the case of UNION OF INDIA VERSUS RAMKRISHNA MILLS CO. LTD. 2006 (8) TMI 669 - SC ORDER and M/S JAI BALAJI INDUSTRIES LTD. VERSUS CCE ST, RAIPUR 2017 (6) TMI 898 - CESTAT NEW DELHI . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant, a manufacturer, is required to reverse an amount under Rule 6(3)(i) of the Cenvat Credit Rules on the sale value of Fly Ash/Coal Ash?
Whether Fly Ash/Coal Ash can be considered as exempted goods for the purpose of Rule 6 of Cenvat Credit Rules, 2004?

Analysis:
The appellant, engaged in manufacturing Graphite and Electrode Nipples, had a captive thermal power plant generating electricity using coal as fuel, resulting in the production of fly ash as waste. The main contention was whether this fly ash, being a residual waste, should attract excise duty and require reversal under Rule 6(3)(i) of the Cenvat Credit Rules. The appellant argued that since fly ash is not a manufactured product but a byproduct of electricity generation, it should not be subject to excise duty or reversal under Rule 6. The appellant relied on judicial precedents, including the High Court of Madras ruling in a similar case, to support their argument.

The appellant further contended that Rule 6 applies to situations where a manufacturer produces both dutiable and exempted finished products, which was not the case with fly ash as it was not a manufactured product. Therefore, the appellant argued that no reversal under Rule 6 of the Cenvat Credit Rules should be applicable to fly ash. The appellant cited various judicial decisions supporting their position, emphasizing that fly ash, being a residuary waste, should not attract excise duty or reversal under Rule 6.

On the other hand, the Authorized Representative for the respondent reiterated the impugned order. However, after considering the arguments from both sides, the Member (Judicial) concluded that the impugned order was not sustainable. Citing the precedent decisions mentioned earlier, the Member set aside the impugned order and allowed the appeal in favor of the appellant, granting consequential benefits.

In conclusion, the judgment clarified that fly ash, being a residual waste and not a manufactured product, should not be subject to excise duty or reversal under Rule 6 of the Cenvat Credit Rules. The decision was based on the interpretation of relevant legal provisions and supported by established judicial precedents, ultimately ruling in favor of the appellant.