2016 (8) TMI 783 - AT - Central Excise

Demand of duty alongwth interest and penalty - Reversal of Cenvat credit - Zinc Ash under Rule 3(5) of the Cenvat Credit Rules, 2004 - Held that - the respondent has never imported Zinc Ash and the Zinc Ash has emerged during the course of processing of Zinc Skimmings, therefore, the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 are not applicable to the facts of this case as the respondent has not cleared Zinc Skimmings as such. Further, the Ld. Commissioner (A) in the impugned order has observed that the respondent has taken the cenvat credit only on the metallic part taken out from the Zinc Skimmings after process and no cenvat credit has been taken attributable to Zinc Ash. In these circumstances, there is no case of the revenue to attract Rule 3(5) of the Cenvat Credit Rules, 2004. - Decided against the Revenue

Summary

Issues:
1. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding reversal of cenvat credit attributable to Zinc Ash.
2. Whether the respondent is liable to reverse cenvat credit under Rule 3(5) for clearing Zinc Ash without payment of duty.

Analysis:
The case involved a dispute over the reversal of cenvat credit attributable to Zinc Ash cleared by the respondent, a manufacturer of Zinc Ingots, without payment of duty. The Revenue contended that as the respondent was clearing Zinc Ash without processing it further, Rule 3(5) of the Cenvat Credit Rules, 2004 applied, necessitating the reversal of cenvat credit. The adjudicating authority had upheld the demand for duty, interest, and penalty. However, the Ld. Commissioner (A) reversed this decision, stating that the respondent had not availed cenvat credit for Zinc Ash. The Revenue appealed this decision.

Upon hearing arguments from both parties, the Member of the Appellate Tribunal considered the facts. It was established that Zinc Ash emerged during the processing of Zinc Skimmings and that the respondent had not imported Zinc Ash separately but had it emerge during manufacturing. The Tribunal noted that the respondent had not cleared Zinc Skimmings as such and had only taken cenvat credit on the metallic part extracted from the Skimmings. Consequently, the Tribunal concurred with the Ld. Commissioner (A) that Rule 3(5) did not apply in this scenario. The Tribunal upheld the decision of the Ld. Commissioner (A) and dismissed the Revenue's appeal, concluding that there was no basis to reverse the cenvat credit attributable to Zinc Ash in this case.

In summary, the Tribunal's judgment clarified that the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 were not applicable as the respondent had not cleared Zinc Ash separately but had it emerge during the manufacturing process. The decision emphasized that the respondent had not availed cenvat credit for Zinc Ash, leading to the dismissal of the Revenue's appeal.