Cenvat credit on waste clearance: exempted scrap from manufacture was not liable to Rule 6 reversal or payment.

Waste material arising during manufacture of bulk drugs and cleared at nil duty was not treated as requiring reversal or payment of 8% or 10% of value under Rule 6 of the Cenvat Credit Rules, 2002/2004. The record showed that Cenvat credit had been taken on inputs used for manufacture of the final product, but the exempted clearance of waste was considered covered by binding precedent and outside the disputed reversal demand. On that basis, the demand, interest and penalty were held unsustainable.

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Issues: Whether the appellant was liable to reverse/pay 8% or 10% of the value of exempted goods cleared by it, in respect of waste material arising during manufacture, under Rule 6 of the Cenvat Credit Rules, 2002/2004.

Analysis: The product in question was waste material arising in the course of manufacturing bulk drugs and was cleared at nil duty. The record showed that the appellant had taken Cenvat credit on inputs used for manufacture of the final product. The issue was treated as already settled by binding precedent, and the exempted waste clearance was not viewed as attracting the disputed amount under Rule 6.

Conclusion: The demand, interest and penalty were not sustainable, and the appeal was allowed.

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