2009 (5) TMI 433 - AT - Central Excise

Cenvat credit- The respondent Hi-grade Pellet Ltd. received iron ore fines and subjected them to process of sieving and grinding. For this purpose they used grinding media which are of steel walls. On this they take Cenvat credit. In the process of sieving/grinding some fines whose sizes are above 10 mm are separated and sold to various purchasers. The case of the department is that the input is used in the manufacture of dutiable and exempted goods. The fines which are found suitable are actually inputs for making pellets. Taking this position revenue proceeded against the appellant and demanded 8% on the sale value of the iron ore chips. The lower authority confirmed the amount demanded interest imposed equal penalty. The respondents approached the Commissioner (A). The Commissioner (A) in the impugned order has given a finding that the demands for 8% amount for the material period on the value of clearances of iron ore chips emerging from the ball mill employing cenvat availed grinding media is not sustainable. Held that- the iron ore fines have been subjected to the process of sieving and grinding. There is force in the contention of the learned advocate that no process of manufacture is involved in getting the iron ore chips. During the process of sieving particles of dimension larger than 10 mm are discarded. In so far as the manufacture of pellet is concerned these particles have to be considered as waste. Therefore they cannot be treated as final products manufactured out of cenvat inputs. The application of Rule 6 of the Cenvat Credit Rules in demanding 8% amount does not appear to be correct. In our view the impugned order of the Commissioner (A) allowing the respondents appeal is legal and proper. We do not find any merit in the grounds of appeal of the Revenue. Hence the same is dismissed

Summary

Issues: Appeal against Order-in-Appeal No. 133/2005-C.E. - Demand for 8% on the sale value of iron ore chips - Applicability of Rule 6 of the Cenvat Credit Rules.

Analysis:
1. The case involved a dispute regarding the demand for 8% on the sale value of iron ore chips by the revenue, alleging that the input was used in the manufacture of dutiable and exempted goods. The appellant, Hi-grade Pellet Ltd., received iron ore fines, subjected them to sieving and grinding using steel grinding media, and sold the separated fines above 10 mm to various purchasers. The Commissioner (A) found the demand unsustainable, relying on relevant case laws.

2. The Revenue challenged the Commissioner (A)'s decision, arguing that the judgment in Gas Authority of India Ltd. v. CCE, Mumbai & Vadodara was inapplicable to the current case as it pertained to different rules. They contended that the iron ore chips in question had a distinct marketable identity, unlike the product in the case cited by the Commissioner (A). Additionally, they disputed the reliance on the case of M/s. Durgapur Cement Works v. CCE, stating that it actually supported the Department's position.

3. The Tribunal carefully examined the facts and arguments presented. It observed that no manufacturing process was involved in obtaining the iron ore chips, and the particles discarded during sieving were considered waste in the pellet manufacturing process. Consequently, the application of Rule 6 of the Cenvat Credit Rules for demanding 8% was deemed incorrect. The Tribunal upheld the Commissioner (A)'s decision, dismissing the Revenue's appeal for lack of merit.

4. In conclusion, the Tribunal found that the iron ore chips were not final products manufactured from Cenvat inputs, supporting the Commissioner (A)'s decision. The appeal by the Revenue was dismissed, affirming the legality and correctness of the impugned order.