2018 (2) TMI 74 - AT - Central Excise

CENVAT credit - inputs/input services used in the manufacture of Silver - silver which is recovered during the course of the Pyro-metallurgical process by the appellant in which zinc concentrate, lead concentrate as well as bulk concentrate are charged - Department entertained a view that Silver is an exempted product, hence the Cenvat credit liable to be reversed - Rule 6 of the Credit Rules - Held that - From the Imperial Smelting Furnace, Zinc bullion which floats at the top and the lead along with impurities such as copper/silver is removed from the bottom and taken to lead refinery, to obtain lead ingots. Silver emerges in the process of refining - the input to the Pyro-metallurgical process is zinc and lead concentrate. In the first part of the process, Zinc is recovered and in the second part, lead is recovered along with the by-product silver - the silver in the present case has indeed emerged in the process of manufacture of zinc by smelting. Accordingly, the appellant will be entitled to the benefit granted by Rule 6(6) (vi) of the CCR, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute regarding Central Excise duty demand on appellant assessee for the period October, 2008 to February, 2013.
2. Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to the recovery of Silver as a by-product during the Pyro-metallurgical process.
3. Interpretation of Rule 6(6)(vi) of the CENVAT Credit Rules, 2004 in the context of manufacturing Silver during the smelting process.

Analysis:
1. The appeals were filed against the Order-in-Original confirming the demand of Central Excise duty, interest, and penalties on the appellant assessee for the period October, 2008 to February, 2013. The dispute arose from the appellant clearing Silver without duty payment, leading to a demand by the department. Penalties were imposed on specific individuals under Rule 26 of the Central Excise Rules, 2002. The appellant, engaged in manufacturing Zinc and Lead, availed CENVAT credit on inputs and services during the relevant period.

2. The dispute primarily centered around the recovery of Silver as a by-product during the Pyro-metallurgical process. The department contended that the Silver, being an exempted product, required the reversal of CENVAT credit under Rule 6 of the Credit Rules. The appellant argued that Silver emerged incidentally during the technical process and cited precedents to support their claim that no reversal was necessary for the credit attributable to the inputs used in the manufacture of Silver.

3. The Tribunal analyzed the applicability of Rule 6(6)(vi) of the CENVAT Credit Rules, 2004, which waived certain requirements for excisable goods like gold or silver arising during the manufacture of copper or zinc by smelting. The Revenue argued that Silver emerging during the lead manufacturing process did not qualify for this provision. However, the Tribunal determined that the Silver indeed emerged during the manufacture of zinc by smelting, entitling the appellant to the benefit under Rule 6(6)(vi). By referencing past decisions and the process of manufacture, the Tribunal concluded that the demands made in the impugned order lacked justification, leading to setting aside of the demands and penalties imposed.

In conclusion, the Tribunal allowed all the appeals, emphasizing the technical aspects of the manufacturing process, the interpretation of relevant rules, and the absence of grounds for the demands raised in the impugned order.