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TMI Blog2007 (1) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... n ore lump but iron ore pellets are treated as iron concentrates and suffer excise duty. For manufacturing sponge iron using direct reduction technique, only iron ore pellets of size about 6 mm are used. The iron ore pellets received in the factory contain small particles of size less than 6 mm commonly known as iron ore fines. These iron ore fines are required to be removed before taking the iron ore pellets to the reaction vessels. Further within the factory during the transportation and handling by conveyor belt etc., some iron ore fines are generated due to collusion/rubbing among the pellets. After completion of reaction some unreacted iron ore fines are generated in the last wash process. Thus iron ore fines are generated in the three different stages : Stage No. 1:-Iron ore pellets received in the factory contains about 3.95% to 9.39% iron ore fines depending upon the source. These iron ore fines are separated by screening process before iron ores are taken to the reaction vessel. Stage No. 2:-About 3.5% of the total iron ore pellets are generated as iron ore fines during the handling within the plant i.e. during the transportation from stock yard to reactor vessel. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld in appeal by Commissioner (Appeals). It is against this order of Commissioner (Appeals) that M/s. Vikram Ispat have come up in appeal vide their Appeal No. E/416/06. 5.It may be stated that iron ore fines which is the subject matter of the above two orders were being cleared by M/s. Vikram Ispat on payment of duty at the sale price at which it was being actually sold under protest as they were claiming that these being waste are not liable to duty. Subsequently four show cause notices were issued for the period January, 2001 to September, 2001, stating that since the iron ore fines cleared by the appellant were nothing but iron ore pellets i.e. inputs on which Cenvat credit was taken the said fines should have been cleared on payment of duty equal to the amount of credit availed in respect of such inputs as required under Rule 57AB of the Central Excise Rules, 44/Rule 3 of the erstwhile Cenvat Credit Rules, 2001. The show cause notice since demanded differential duty to the extent of Rs. 2,52,15,062/-. These show cause notices were dropped by the Commissioner holding that since the fines has been held by him in earlier order to be waste, they cannot be considered as input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored separately although it is alleged in the show cause notices that such screened out fines are not accounted for or recorded in any manner as required under Rule 57-I (2) which fact has also been admitted by the company official. It was also stated that the CESTAT has vide Order Nos. A/786 to 789/WZB/2004/C-I, dated 27-4-2004 [2004 (176) E.L.T. 423 (T)] in the case of same assessee on identical issue remanded the case to Commissioner (Appeals) for fresh decision where according to the department iron ore fines should be removed on payment of duty equal to credit availed. 8.Learned Advocate for the appellant submitted that the reactor in which the iron ore gets converted into the sponge iron is designed such that the particle size of iron ore should not be in excess of 32 mm and should not be less than 6 mm. Therefore it is necessary that iron ore before being fed into reactor is screened to ensure that only the appropriate size ore enter the reactor. The grounds raised by the department that the extent of the fines is in the range of 14.59% is not correct as they have provided a detailed list consisting of actual amount of fines in the supplies received, both imported and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been lying in their premises as waste. It was with great difficulty that in the year 1998 they found one buyer M/s. L T and later on M/s. Reliance for use in cement factory. It was of no use for manufacture of their final product. 12.In regard to their submission that the fines arising at all the three stages are to be considered as arising during the manufacture or in or in relation to manufacture they referred to the decision of CESTAT in the case of Tata Motors Ltd. v. Commissioner of Central Excise, JSR - 2005 (179) E.L.T. 413 (Tri.-Kolkata) where Modvat relating to transit/handling losses was held to be admissible. It was submitted that though there is no shortage in their case but due to transit and handling, fines gets generated. It is not the case of the department that the goods have not been received. Appellant pays duty on entire quantity received irrespective of the fact that small quantity is fines. The entire quantity is taken into factory for manufacture. The credit availed is not in excess of duty paid on inputs. If they are pellets for payment of duty when received from the supplier, they are also pellets for the purpose of Modvat. The operation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds "or that input have become waste in or in relation to the manufacture of final product were added this widening the scope of Rule 57D." 16.As regards revenue's emphasis that the inputs were not accounted for in terms of Rule 57-I it was submitted that the inputs have been used in the manufacture of final product or in or in relation to the manufacture of final product. The entire waste was lying in their factory which was not removed nor it is the revenue's case that the same was clandestinely removed. The same was cleared on payment of duty with full knowledge of the department and therefore it cannot be said that the. inputs have not been accounted for. 17.As regards Appeal No. E/l-375/05 regarding payment of duty on the ground that fines should have been cleared by reversing the credit availed on the inputs as required under Rule 57AB, it was submitted that since fines were waste material they cannot be treated as inputs as such and have been correctly cleared on payment of applicable duty at the price at which the waste has been sold. The waste consisted of fines of iron ore in lump which was not dutiable as well as pellets (iron concentrates) which only was dutiable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fines which certainly have become waste for the appellants in or in relation to the manufacture of final product. Our view finds support, from the Tribunal decision in the case of Hindustan Petroleum (cited supra) where it has been held that "in or in relation to manufacture of final product" covers entire manufacturing process from initial stage of handling of inputs and the Supreme Court decision in the case of Collector v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (S.C.) wherein it has been held that the process of handling/lifting/pump-ing/transfer/transportation of raw materials also a process in or in relation to the manufacture, it integrally connected with further operations, which constitute manufacture. We therefore hold that the credit has been correctly availed and dismiss revenue's appeal No. E/3310/04 and allow M/s. Vikram Ispat's appeal E/416/06 by setting aside the order of the Commissioner (Appeals) dated 7-11-2005. 19.As regards third appeal No. E/1375/05 filed by the revenue, as we have already held that the fines are in the nature of waste, its clearance cannot be equated with the clearance of inputs as such and consequently the provision of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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