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2024 (3) TMI 1035 - AT - Central ExciseCENVAT Credit - exempt goods or not - zinc dross which emerged during the manufacture of final product of the appellant, due to the galvanizing process involved in the said manufacturing process - HELD THAT - The issue is no more res-integra. It was initially taken up by High Court of Mumbai in the case of HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE 2014 (12) TMI 657 - BOMBAY HIGH COURT wherein it was held that the dross and skimming of aluminium, zinc or other non-ferrous metals since emerges as waste, that the zinc dross and zinc ash cannot be treated as excisable commodities. Subsequent to the said decision, the Hon ble Supreme Court had again took up the issue in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT holding that the waste products (Baggasse in the said case) emerging during the manufacturing process of the final product are not the outcome of any process which can be termed as manufacture. Thus, such waste products cannot be categorized as exempted goods. Hence question of applicability of Cenvat Credit Rules does not at all arise. Commissioner (Appeals) in the present case is observed to still have followed the said rescinded Circular dated 25.04.2016. The said act of the adjudicating authority not merely amounts to mis-interpretation of the provision, but it amounts to the violation of statutory principles, the circular dated 07.07.2022 being binding upon him. The ignorance of law laid down by the Hon ble Supreme Court is a condemnable act of judicial indiscipline. The order passed by the Commissioner (Appeals) is held not sustainable and the same is hereby set aside - Appeal allowed.
Issues:
The issues involved in the judgment are whether zinc dross cleared by the appellant is to be treated as exempted goods manufactured by the appellant, and the interpretation of the Cenvat Credit Rules, 2004. Issue 1: Treatment of Zinc Dross as Exempted Goods The Department observed that the appellant, engaged in manufacturing dutiable goods, also cleared zinc dross, an exempted good. A Show Cause Notice was issued proposing a duty demand, which was confirmed in the Order-in-Original. The appellant contended that zinc dross emerged automatically during the galvanization process and should not be considered as exempted goods. The Circular relied upon by the adjudicating authority was rescinded by the Department. The appellant argued that goods emerging in the manufacturing process unintentionally cannot be considered as manufactured goods. The Department argued that zinc dross is a product manufactured by the appellant as it emerges during the manufacturing process. The issue was analyzed in light of previous judicial decisions and Circulars. Issue 2: Interpretation of Cenvat Credit Rules The appellant argued that the order under challenge misinterpreted the Cenvat Credit Rules, specifically Rule 6(3). The appellant claimed that the Explanation (1) added to Rule 6(1) cannot be applied to zinc dross as it is waste exempted by the appellant. The Commissioner (Appeals) was criticized for following a rescinded Circular despite subsequent Supreme Court decisions. The Department defended the Commissioner's decision based on the Circular and previous judicial interpretations. The Tribunal held that the Circular was unsustainable in law and that the Commissioner's decision violated statutory principles. The order was set aside, and the Central Board of Indirect Taxes & Customs was directed to take appropriate action against the Commissioner. Conclusion: The Tribunal allowed the appeal, holding that the zinc dross cleared by the appellant cannot be treated as exempted goods manufactured by the appellant. The Commissioner's decision to follow a rescinded Circular was deemed unsustainable and a violation of statutory principles. The judgment emphasized the importance of adhering to legal principles established by higher judicial forums and Supreme Court decisions.
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