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2015 (4) TMI 896 - AT - Central ExciseBenefit of exemption Notification No. 15/2005-CE dated 02.05.2005 - Sale of Cocoa shells - Exciseability of by product - Held that - cocoa shells arise during the manufacturing process of cocoa butter and cocoa powder. The appellant is not manufacturing cocoa shells it is arisen unavoidably during the process of manufacturing cocoa butter and cocoa powder. Therefore the cocoa shells is nothing but by-product or waste. This shows that Rule 6(2) of CENVAT Credit Rule and payment of 10% provided therein is not applicable. This issue is squarely covered by the Hon ble Supreme Court judgement in the case of Rallis India (2008 (12) TMI 46 - HIGH COURT BOMBAY) and also Hindustan Zinc Ltd. - 2014 (5) TMI 253 - SUPREME COURT . - lower authority has wrongly confirmed the demand of 10% in terms of rule 6(2) of the CENVAT Credit Rules, 2004. Therefore, the impugned order is set aside - Decided in favour of assessee.
Issues:
1. Interpretation of Rule 6(2) of the CENVAT Credit Rules, 2004 regarding payment of 10% on exempted goods. 2. Classification of cocoa shells as a by-product or waste. 3. Applicability of exemption Notification No. 15/2005-CE dated 02.05.2005. 4. Legal precedents supporting the appellant's position. Analysis: Issue 1: Interpretation of Rule 6(2) of the CENVAT Credit Rules, 2004 The case involved a dispute over the demand of 10% of the value of exempted goods, i.e., cocoa shells, under Rule 6(2) of the CENVAT Credit Rules, 2004. The appellant argued that since the cocoa shells were a by-product or waste arising unavoidably during the manufacturing process of cocoa butter and cocoa powder, the payment requirement under Rule 6(2) did not apply. The Tribunal agreed with this interpretation, citing legal precedents such as the judgments in Rallis India and Hindustan Zinc Ltd., which held that if a product emerges unavoidably during the manufacturing process, it should be considered a by-product, exempt from the payment obligation under Rule 6(2). Issue 2: Classification of cocoa shells as a by-product or waste The Tribunal examined the nature of cocoa shells in the manufacturing process of chocolate. It was established that cocoa shells were not intentionally manufactured but arose unavoidably during the process of obtaining cocoa butter and powder. The Tribunal concluded that cocoa shells qualified as a by-product or waste, supporting the appellant's contention that the payment requirement under Rule 6(2) did not apply to them. Issue 3: Applicability of exemption Notification No. 15/2005-CE dated 02.05.2005 The appellant had availed the benefit of exemption under Notification No. 15/2005-CE for selling cocoa shells in the open market without duty payment. The Tribunal's decision to set aside the demand of 10% under Rule 6(2) implied that the exemption notification was applicable to the cocoa shells, further supporting the appellant's position in the case. Issue 4: Legal precedents supporting the appellant's position The appellant relied on legal precedents, including judgments in Rallis India, Jai Steels (India), and CCE Vs. Pioneer Agro Industries Ltd., to support their argument that the payment obligation under Rule 6(2) did not apply to unavoidable by-products or waste. The Tribunal found merit in these precedents and ruled in favor of the appellant based on the consistent view of the Hon'ble Supreme Court in similar cases. In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant, emphasizing the nature of cocoa shells as a by-product or waste exempt from the payment requirement under Rule 6(2) of the CENVAT Credit Rules, 2004.
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