CENVAT credit on manufacturing waste: segregated pellet fines were treated as refuse, so no reversal was required.

CENVAT credit on iron ore pellets was not required to be reversed where pellets below 6 mm were segregated during screening and cleared as waste on payment of duty. The Tribunal treated the segregated material as waste or refuse arising in the course of manufacture, not as an input cleared as such, and held that screening formed part of the manufacturing process. It applied the principle that credit is preserved where part of the inputs becomes waste or refuse in or in relation to manufacture, and found Rule 57AB inapplicable. The credit was upheld and no reversal was required.

---

---

Issues: Whether CENVAT credit taken on iron ore pellets was required to be reversed when pellets below 6 mm were segregated during screening and cleared as waste on payment of duty.

Analysis: The Tribunal found that the segregated material was not an input cleared as such, but waste arising in the course of the manufacturing process. Screening formed part of the manufacturing process, and the smaller pellets/fines arose inevitably during handling and transportation before the reactor stage. The earlier decision in the assessee's own case had already held that such waste or refuse does not disentitle the assessee from credit, as Rule 57D protects credit where part of the inputs becomes waste or refuse in or in relation to manufacture. The Tribunal also accepted that Rule 57AB was not attracted on the facts.

Conclusion: The credit was correctly availed and no reversal was required; the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed.

Ratio Decidendi: Credit on inputs cannot be denied merely because part of the inputs becomes waste or refuse during processing, where the waste arises in or in relation to manufacture and is not a clearance of inputs as such.

---