Iron Ore Fines not excisable, no duty imposed. Obligation under Rule 6(3) unsustainable.

The court held that Iron Ore Fines do not amount to manufacture and are not excisable, thus not subject to duty. It was found that maintaining separate accounts for dutiable and exempted products was impossible due to the nature of Iron Ore Fines as an unavoidable byproduct, leading to the dismissal of the Revenue's appeal. The obligation under Rule 6(3) of the Cenvat Credit Rules was deemed unsustainable, and the demand for payment of duty on Iron Ore Fines cleared without payment was set aside.

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Issues:
Classification of Iron Ore Fines under Tariff, Application of Rule 6(3) of Cenvat Credit Rules, 2004, Manufacture of Iron Ore Fines, Obligation to maintain separate account and inventory for dutiable and exempted products.

Classification of Iron Ore Fines under Tariff:
The case involved the classification of Iron Ore Fines under the Tariff, with the department contending that Iron Ore Fines are fully exempt from duty. The department issued a show cause notice demanding payment of duty on Iron Ore Fines cleared without payment. The Addl. Commissioner confirmed the demand under Rule 6(3), but the Commissioner (Appeals) set it aside, stating that Iron Ore Fines do not amount to manufacture and are not excisable. The Revenue appealed this decision.

Application of Rule 6(3) of Cenvat Credit Rules, 2004:
The Departmental Representative argued that since common cenvat credit availed inputs were used for both dutiable and exempted final products, and separate accounts were not maintained, Rule 6(3) should apply. It was emphasized that Iron Ore Fines are exempted goods under Cenvat Credit Rules. The respondent contended that Iron Ore Fines are not a manufactured product and cited relevant case laws to support this argument.

Manufacture of Iron Ore Fines:
The respondent argued that Iron Ore Fines do not qualify as a manufactured product, emerging during the crushing of Iron Ore. They highlighted that the show cause notice did not specify the common inputs or input services used up to this stage, making Rule 6(3) inapplicable. The judge agreed, stating that the demand under Rule 6(3) should be set aside as the obligation to maintain separate accounts for dutiable and exempted products was impossible due to Iron Ore Fines being an unavoidable byproduct.

Obligation to maintain separate account and inventory for dutiable and exempted products:
The judge emphasized that even if there were common inputs, complying with Rule 6(2) by maintaining separate accounts was impossible due to the nature of Iron Ore Fines as a byproduct. The principle of Lex non Cogit ad impossibilia was applied, stating that an obligation that is impossible to fulfill cannot be penalized. Consequently, the impugned order was deemed unsustainable, and the Revenue's appeal was dismissed.

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