2019 (8) TMI 420 - AT - Central Excise

Reversal of CENVAT Credit - non-excisable/exempt goods - Zinc Dross/Cyclone/Ash - Rule 6(3) of the CCR, 2004 - HELD THAT - Rule 6 of the CCR, 2004 is not applicable to the waste products which arises during the process of manufacture and is sold for some consideration. Further, I find that in the present case, the appellant is not the manufacturer of zinc waste/dross which comes into existence during the manufacture of Galvanized Steel Pipes/Tubes. Further, I find that the ratio in the case of APL Apollo Tubes Ltd. 2019 (7) TMI 733 - CESTAT CHENNAI is squarely applicable in the present case and therefore, by following the ratio of the said decisions, I am of the considered view that the impugned order is not sustainable in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Rule 6 of CENVAT Credit Rules, 2004 to waste products arising during the manufacturing process.
- Classification of non-excisable goods for reversal of credit on input and input services.
- Judicial precedents supporting the appellant's position.

Analysis:
1. Applicability of Rule 6 of CENVAT Credit Rules, 2004: The appellant contested the demand raised by the Department under Rule 6 of the CCR, 2004, arguing that the rule does not apply to waste products arising during the manufacturing process. The appellant emphasized that the waste products, such as zinc dross/cyclone/ash, do not qualify as final goods or exempted goods. The appellant relied on various judicial precedents to support this argument, highlighting decisions like APL Apollo Tubes Ltd. and CCE Meerut-I Vs Bajaj Hindustan Sugar Ltd. These cases established that waste products not consciously manufactured by the assessee and emerging during the manufacturing process cannot be considered goods manufactured by the appellant. The Tribunal's findings in the case of APL Apollo Tubes Ltd. were particularly crucial in supporting the appellant's stance.

2. Classification of non-excisable goods: The Department issued a Show Cause Notice (SCN) to the appellant, demanding payment under Rule 14 of CCR, 2004 for the period in question. The appellant contended that the impugned goods, classified under CTH 79020090, were non-excisable goods cleared for consideration from the factory. Therefore, the appellant argued that these goods should be treated like exempted goods for the purpose of credit reversal on input and input services. The appellant's position was supported by the argument that Rule 6 of CCR, 2004 should only apply to end goods manufactured by the appellant and not to waste products.

3. Judicial Precedents: The appellant presented a series of judicial precedents to bolster their case, demonstrating that the issue at hand had been settled in favor of the assessee in various decisions by the Tribunal and High Courts. The decisions cited, such as UOI Vs DSCL Sugars Ltd. and Nestle India Ltd. Vs CCE, Noida, supported the appellant's argument that waste products arising during the manufacturing process should not be subject to the provisions of Rule 6 of CCR, 2004. The appellant's reliance on these precedents aimed to establish a consistent legal interpretation in similar cases.

4. Final Decision: After considering the submissions of both parties and reviewing the material on record, the Tribunal found merit in the appellant's arguments. Citing the decision in the case of APL Apollo Tubes Ltd. and other supporting precedents, the Tribunal concluded that the impugned order was not sustainable in law. Therefore, the Tribunal set aside the demand raised by the Department under Rule 6 of CCR, 2004, and allowed the appeal of the appellant. The operative portion of the order was pronounced in open court on 06/08/2019.