2013 (2) TMI 170 - AT - Central Excise

Denial of input credit - Reversal of input credit - waste - residue - by-product - Circular No.3445/61/97-CE, dated 23.10.1997 - Assessee engaged in manufacturing of Paper and Paper Boards - Sludge generated during manufacturing process which was sold by them for a nominal value - Sludge was cleared by them without payment of duty - Held that - Following the decision in case of THE AMARAVATHI CO-OPERATIVE SUGAR MILLS LTD. (2012 (8) TMI 377 - CESTAT, CHENNAI) waste product was chargeable to nil rate of duty in the Tariff, hence held to be non-excisable but in this case, sludge is exempted by an Exemption Notification. Therefore the appellants are not required to reverse the input credit availed by them which is attributable to sludge. In favour of assessee

Summary

Issues:
Denial of input credit for 'Sludge' cleared without payment of duty.

Analysis:

Issue 1: Denial of input credit for 'Sludge'

The appellants, manufacturers of 'Paper' and 'Paper Boards,' were denied input credit for 'Sludge' cleared without payment of duty. The appellants argued that the sludge was a waste, residue, and by-product, exempt from the Central Excise Tariff, and therefore, they were not required to reverse the input credit. They relied on Board's Circular No.3445/61/97-CE and previous decisions of the Tribunal and the Hon'ble apex court. The appellants contended that the impugned order should be set aside.

Issue 2: Arguments against input credit reversal

The arguments against the appellants' position were strongly opposed by the learned DR. It was contended that sludge, although a by-product with market value, was mentioned in the Central Excise Tariff and chargeable at a 'nil' rate of duty. Therefore, the CENVAT credit attributable to sludge needed to be reversed by the appellants.

Issue 3: Tribunal's decision

After considering the submissions from both sides, the Tribunal differentiated the case at hand from the precedent of M/s.Amaravathi Co-operative Sugar Mills Ltd. In this case, the sludge was exempted by an Exemption Notification, unlike the waste product in the previous case. Citing the recent decisions of the Tribunal and the Hon'ble apex court, the Tribunal held that the appellants were not required to reverse the input credit attributable to sludge. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, allowing them to retain the input credit for the 'Sludge' cleared without payment of duty, based on the exemption notification and the precedent set by previous decisions.