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2024 (3) TMI 275 - AT - Central ExciseCENVAT Credit - waste/by-product generated i.e. Aluminium dross during the manufacture of Aluminium products from Alumina in the appellant's factory which is sold by the appellant without payment of duty - exempt goods or not - requirement to pay an amount of duty equal to 6% of the value of exempted goods as stipulated under Rule 6(3) of Cenvat Credit Rules, 2004 - applicability of Rule 6 of CCR, 2004 - HELD THAT - It is observed that the issue was initially settled by the Hon'ble Apex Court in the case titled as UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT wherein the Hon'ble Apex Court while examining the issue of excisability of waste product/by-product arising during the course of manufacture of the excisable product (bagasse in sugar mills in the said case) had affirmed that such waste is not a manufactured product. Subsequent to said decision, the Board vide the aforesaid Circular dated 25.04.2016 had acknowledged that the said judgement applies to both the periods i.e the period pre as well as post insertion of explanation in Section 2(d) of Central Excise Act, 1944 (CEA, 1944) on 10.5.2008. It has been brought to the notice that this Circular was again challenged and the decision in UNION OF INDIA ORS. VERSUS M/S INDIAN SUCROSE LIMITED 2022 (7) TMI 353 - SC ORDER by the Hon'ble Supreme Court has rescinded the said Circular re-affirming the findings in DSCL Sugar Ltd. Ors. case. Pursuant thereto the aforementioned Circular dated 25.04.2016 was withdrawn vide Circular No. 1054/2005 dated 07.07.2022. Perusal thereof clarifies that the decisions by Hon'ble Apex Court considering that the waste/by-product arising during the manufacture of excisable goods are not the result of the activity of manufacture have been accepted. Rule 6 of Cenvat Credit Rules talks about the obligation of the manufacturer who deals in manufacturing of exempted as well as excisable goods. The occurrence of a by-product/waste is not an activity of manufacture, the question of applicability of Rule 6 of CCR, 2004 does not at all arise. The findings in the order under challenge since are based on applicability of said Rule 6 of CCR, 2004 and the Circular of 2016 which stands already been rescinded by the Hon'ble Apex Court, the order is not sustainable. The decision of Hon ble Supreme Court in Sucross India has been accepted by the Department itself by their subsequent circular. Applying the rescinded circular that too to fasten a wrong excise duty liability is definitely an error apparent on record the order for the said reason and in view of entire above findings is not sustainable. It is apparent from record that Supreme Court s decision in Sucrose India as well as the Circular dated 07.07.2022 were brought to the notice of Commissioner (Appeals). Ignoring the outcome thereof is held to be an act of serious judicial indiscipline. The Board be notified of such act on part of Commissioner (Appeals) with a liberty to take appropriate action if deemed fit. Appeal allowed.
Issues involved:
The issue involves the applicability of Rule 6 of Cenvat Credit Rules, 2004 on the waste/by-product generated during the manufacture of excisable goods. Summary: Issue 1: Applicability of Rule 6 of CCR, 2004 on waste/by-product generated during manufacturing: The appellant, engaged in manufacturing excisable goods, was observed to have cleared "Aluminium dross" without paying central excise duty. The Department demanded duty under Rule 6(3) of Cenvat Credit Rules, 2004. The appellant contended that Aluminium dross, being a waste/by-product, is not subject to CCR, 2004. The appellant cited previous decisions in their favor and a Board Circular supporting their stance. The Authorized Representative argued against the appellant's contentions. Issue 2: Legal precedents and Circulars supporting appellant's stance: The appellant relied on various legal decisions, including CCE vs. Bharat Aluminium Company Ltd and Hindalco Industries Ltd vs. CCE, to support their argument that waste/by-products like Aluminium dross are not subject to excise duty. They also highlighted a Board Circular rescinding a previous Circular, further affirming the non-applicability of CCR, 2004 to such waste/by-products. Issue 3: Observations and findings of the Tribunal: The Tribunal observed that waste/by-products generated during manufacturing processes are not considered manufactured products. Referring to legal precedents, including a Supreme Court decision, the Tribunal concluded that such waste is not excisable. The Tribunal also noted the withdrawal of a Circular acknowledging the non-excisability of such waste, further supporting the appellant's case. Issue 4: Decision and order of the Tribunal: Based on the legal precedents, Circulars, and findings, the Tribunal allowed the appeal, holding that the application of Rule 6 of CCR, 2004 to waste/by-products like Aluminium dross was incorrect. The Tribunal deemed the order under challenge unsustainable due to the rescinded Circular and the acceptance of the Supreme Court's decision by the Department. The Tribunal directed notification to the Board regarding the Commissioner (Appeals) disregarding relevant legal outcomes. In conclusion, the Tribunal allowed the appeal with consequential relief, emphasizing the non-applicability of Rule 6 of CCR, 2004 to waste/by-products generated during manufacturing processes.
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