Waste generated in manufacture does not trigger CENVAT reversal when it is only incidental saw dust, not an exempt final product.

Saw dust generated incidentally during trimming and sanding in the manufacture of dutiable particle board was treated as waste, not as a final product. The rule requiring payment or reversal for common inputs used in exempted final products did not apply because no exempted final product was manufactured from the common inputs; only refuse or by-product emerged in the course of manufacture. Accordingly, no amount was payable under Rule 6(3)(b) of the CENVAT Credit Rules, 2004 in respect of the saw dust.

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Issues: Whether saw dust generated during manufacture of particle board, being waste and not a final product, attracted payment under Rule 6(3)(b) of the CENVAT Credit Rules, 2004.

Analysis: Saw dust arose during the trimming and sanding process as waste from the manufacture of dutiable particle board and pre-laminated particle board. It was not manufactured as a final product. The liability under the provision dealing with common inputs for dutiable and exempted final products applies where exempted final products are manufactured using common inputs, and not where only waste, refuse, or by-product emerges in the course of manufacture of dutiable goods. The reasoning was aligned with the principle that waste or by-product generated incidentally in manufacture does not fall within the mischief of the formula-based reversal/payment provision.

Conclusion: No amount was payable under Rule 6(3)(b) of the CENVAT Credit Rules, 2004 in respect of the saw dust. The issue was decided in favour of the assessee.

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