2020 (2) TMI 290 - AT - Central Excise

CENVAT Credit - iron ore fines - Exempt goods or not - Whether the iron ore fines as cleared by the appellants can be considered as a separate excisable but exempted commodity? HELD THAT - In the present case, the finer iron ore/ the input as inevitably generated in the process of segregation is admittedly not usable in the klin for the purpose of manufacture of the final product i.e. the sponge iron. However, it is still the part of the input. The iron ore fines are therefore, held not to be the excisable commodity. The findings of original adjudicating authority are found to be correct. The findings of impugned order under challenge being contradictory to this effect are held liable to be set aside. 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:
1. Classification of iron ore fines as excisable but exempted commodity.
2. Liability of the appellants to pay duty on iron ore fines.
3. Interpretation of Cenvat Credit Rules, 2004 regarding exempted goods.

Analysis:
1. The case involved two appeals concerning the classification of iron ore fines as an excisable but exempted commodity. The appellants, engaged in manufacturing sponge iron, were under scrutiny for not mentioning duty paid on iron ore fines in their returns. The Department contended that the appellants were liable to discharge duty on iron ore fines, issuing a show cause notice for recovery. The initial adjudicating authority dropped the demand, but the Commissioner (Appeals) upheld it, leading to the appeals before the Tribunal.

2. The appellants argued that since no manufacturing process was involved in obtaining iron ore fines, they should not be considered excisable goods. They highlighted their registration for manufacturing sponge iron, not iron ore fines, and claimed eligibility for cenvat credit under Rule 3 of Cenvat Credit Rules. They sought to set aside the Commissioner's order, emphasizing the lack of exemption notification for iron ore fines.

3. The Department argued that iron ore fines, being classifiable under the Central Excise Tariff due to their iron content, were exempted goods necessitating compliance with Rule 6 of CCR. They contended that the appellants were liable to pay 6% of the value of exempted goods, as proposed in the show cause notice. The Department supported the Commissioner's decision, asserting the correctness of the demand.

4. The Tribunal scrutinized the manufacturing process of the appellants, emphasizing the generation of iron ore fines during segregation, which did not involve a manufacturing activity. Citing relevant case law, the Tribunal concluded that the iron ore fines were not excisable goods, supporting the original adjudicating authority's findings. Additionally, the Tribunal noted the absence of evidence supporting the classification of iron ore fines as exempted goods, leading to the set-aside of the Commissioner's order.

5. The Tribunal's decision was influenced by the lack of manufacturing activity in obtaining iron ore fines and the absence of an exemption notification for such goods. Relying on precedent and legal interpretations, the Tribunal allowed the appeals, setting aside the orders under challenge and relieving the appellants from the duty liability on iron ore fines.