2023 (9) TMI 133 - AT - Central Excise

Reversal of CENVAT Credit - value of sludge/waste under the provisions of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 inevitably arising out during the manufacture of paper and paper board - HELD THAT - In the Appellant s own case COMMISSIONER OF CENTRAL EXCISE, MEERUT-I VERSUS STAR PAPER MILLS LTD. 2003 (9) TMI 204 - CESTAT, NEW DELHI Tribunal rejected the Department s appeal by holding When the Waste Sludge is squarely covered by the provisions of Rule 57D(1), Modvat credit would get settled in accordance with that rule and there is no scope to apply the provisions of Rule 57CC for the same set of transactions. Hon ble Supreme Court in the case of UNION OF INDIA VERSUS AHMEDABAD ELECTRICITY CO. LTD. 2003 (10) TMI 47 - SUPREME COURT has held that since excise duty is an incidence of manufacture therefore it is essential that the product in question should have gone through a process of manufacture. The issue is no more res integra and decided in favour of the Appellant - Appeal allowed.

Summary

Issues Involved:
1. Whether the Appellant is required to reverse an amount on the value of waste sludge arising during the manufacture of paper and paper board under the Cenvat Credit Rules.
2. Whether the waste sludge is considered an excisable product and subject to excise duty.

Summary of the judgment:
- The appeal was filed against an order confirming a demand against the Appellant for INR 4,84,142 plus interest under the Cenvat Credit Rules and Central Excise Act.
- The Appellant, a manufacturer of paper, avails Cenvat credit on inputs and sells waste sludge arising as a by-product of the manufacturing process.
- The Department alleged that the Appellant did not maintain separate accounts for inputs used in manufacturing dutiable and exempted products, leading to the demand.
- The Appellant argued that waste sludge is not excisable as it does not satisfy the test of manufacture and marketability.
- The Tribunal referred to previous decisions where waste sludge was considered a waste or by-product, not subject to excise duty.
- The Supreme Court held that excise duty is an incidence of manufacture, requiring the product to go through a manufacturing process.
- The Tribunal allowed the appeal in favor of the Appellant based on precedent decisions, providing consequential relief as per law.

Separate judgment delivered by the judges:
- The Hon'ble Supreme Court and various High Courts' decisions were cited to support the conclusion that waste sludge emerging during the manufacturing process is not considered excisable goods, as it does not arise from a manufacturing activity under the Central Excise Act.