2024 (1) TMI 719 - AT - Central Excise

CENVAT Credit - iron fines emerging in the process of manufacture of sponge iron ore - iron ore fines are not excisable and no excise duty is paid - non-maintenance of separate records - applicability of Rule 6(3) of the CCR - HELD THAT - This issue is no longer res integra and in the case of M/S GHANKUN STEELS PRIVATE LIMITED. VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE, RAIPUR. 2019 (5) TMI 1998 - CESTAT NEW DELHI , it has been held by this Tribunal that the Respondent need not deposit the amount equal to 6% under Rule 6(3) of the CCR. The amendment made by way of explanation to Rule 6 makes no difference because the question is not if the goods are non-excisable or excisable but exempted but whether the iron ore fines are manufactured or not and this Tribunal has consistently held that the iron ore fines are not manufactured but only emerge during the process of manufacture of sponge iron. Accordingly, there are no force in the appeal by the Revenue - The appeal is, accordingly, dismissed and the impugned order is upheld.

Summary

Issues involved: Challenge to the Commissioner (Appeal) order setting aside demand for payment under Rule 6(3) of Cenvat Credit Rules, 2004 for failure to maintain separate records for iron ore fines.

Summary:

Issue 1: Challenge to the Commissioner (Appeal) order
The Revenue challenged the Commissioner (Appeal) order which set aside the demand for payment under Rule 6(3) of Cenvat Credit Rules, 2004. The respondent, engaged in manufacturing sponge iron, availed cenvat credit on inputs and input services. The Revenue contended that since iron ore fines emerged during the manufacturing process and were sold without excise duty payment, the respondent should have maintained separate records as per Rule 6(1) of CCR. A show cause notice was issued to recover the amount under Rule 6(3) of CCR, along with interest and penalty. The Additional Commissioner confirmed the proposals, leading the respondent to appeal to the Commissioner (Appeal) who set aside the demand, interest, and penalty. The Revenue filed an appeal against this decision.

Issue 2: Requirement to deposit 6% of the value of iron ore fines
The central question was whether the respondent was obligated to deposit an amount equal to 6% of the value of iron ore fines under Rule 6(3) of CCR. The Revenue argued that since no excise duty was paid on the iron ore fines, Rule 6 applied, mandating separate records for dutiable and exempted/non-excisable goods. Failure to maintain these records required payment under Rule 6(3) of CCR. The Revenue contended that the Commissioner (Appeals) erred in setting aside the demand.

Issue 3: Interpretation of Rule 6 in relation to iron ore fines
The Tribunal analyzed whether Rule 6 of CCR applied to the situation where iron ore fines emerged as a by-product during the manufacture of sponge iron. The Revenue asserted that Rule 6 applied regardless of excisability, requiring payment for the iron ore fines. However, the Tribunal, citing a previous case, determined that the respondent was not obligated to pay 6% under Rule 6(3) of CCR as the iron ore fines were not considered manufactured goods but rather a by-product of the main manufacturing process. The Tribunal upheld the Commissioner (Appeal) decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner (Appeal) decision, ruling in favor of the respondent regarding the payment obligation under Rule 6(3) of CCR for iron ore fines emerging during the manufacturing process of sponge iron.