2020 (9) TMI 786 - AT - Central Excise

Reversal of Cenvat Credit - clearance of iron ore fines - separate excisable goods but exempted commodity or not - whether iron ore fines in question are needed to be considered as exempted goods, being sold for consideration during the relevant period as provided under the amended provisions of Rule 6 (1) of CCR, 2004? - HELD THAT - It is foremost important to understand the procedure or the activity of the appellant. Not only from the show cause notice, but from the appellant s submission, the admitted procedure adopted by the appellant in manufacturing the final product i.e. sponge iron is that, the appellant procures iron ore etc., as the input for manufacturing sponge iron. The 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 fed in the sponge iron klin. In the aforesaid process of segregation, 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. It is not the case of the respondent that sieving out of the finer input from coarser one, will be a manufacturing activity. In the present case, the fine iron ore (input) is 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 perverse and liable to be set aside - Further, the Department has brought nothing on record to show that the iron ore fines can be considered as exempted goods. 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. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of duty on clearance of iron ore fines.
2. Classification of iron ore fines as exempted goods.
3. Compliance with Cenvat Credit Rules, 2004.
4. Interpretation of manufacturing activity for excisable goods.

Analysis:
1. The issue in question revolved around the liability of duty on the clearance of iron ore fines by the appellants. The Department contended that the iron ore fines should be considered as exempted goods, thus attracting duty payment. The show cause notice proposed a recovery amount, which was initially dropped but later confirmed by the Commissioner (Appeals), leading to the appeal before the Tribunal.

2. The classification of iron ore fines as exempted goods was a crucial aspect of the case. The Department argued that since the production of iron ore fines was a manufacturing activity of the appellants, they were required to maintain separate accounts or pay duty on the exempted goods. The Commissioner (Appeals) upheld this view, leading to a challenge by the appellant.

3. Compliance with the Cenvat Credit Rules, 2004 was a significant point of contention. The appellant argued that since the iron ore fines did not undergo a manufacturing process as per Rule 2(f) of the Central Excise Rules, they should not be considered excisable goods. The appellant also highlighted their registration for manufacturing sponge iron, not iron ore fines, and claimed eligibility for cenvat credit under Rule 3 of CCR.

4. The interpretation of manufacturing activity for excisable goods was a critical aspect of the judgment. The Tribunal analyzed the process adopted by the appellant in manufacturing sponge iron, emphasizing that the generation of iron ore fines was not a manufacturing activity but a by-product of segregation. Citing relevant legal precedents, the Tribunal concluded that iron ore fines were not excisable goods and set aside the order confirming the demand for duty payment.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the order under challenge and restoring the original order. The judgment clarified the non-excisability of iron ore fines generated during the manufacturing process of sponge iron, emphasizing the lack of duty liability on such fines. The decision was based on a detailed analysis of the manufacturing process and relevant legal provisions, ultimately allowing the appeal.