2014 (1) TMI 57 - AT - Central Excise

Tribunal grants waiver on CENVAT Credit Rule 6(3) demand & penalty, ruling in favor of appellant

The tribunal granted waiver and stay to the appellant regarding the demand under Rule 6(3) of the CENVAT Credit Rules, 2004 and penalty imposed. The ... Cenvat credit utilized for exempted as well as dutiable goods - Waiver of Pre-deposit of Cenvat credit under Rule 6(3) of the CENVAT Credit Rules, 2004 - Revenue was of the view that the appellant should have maintained separate accounts in respect of common inputs which were to be used in the manufacture of pig iron (dutiable product) and un-granulated slag (the so-called exempted product) – Held that:- Following M/s. Chamundeswari Sugars Ltd. vs. CCE, Mysore [2013 (12) TMI 53 - CESTAT BANGALORE] - Prima facie, for the application of Rule 6 (3) to a given case, a manufacturer should be shown to have manufactured both dutiable and exempted final products without maintaining separate accounts – It is difficult at this stage to hold that the appellant manufactured un-granulated slag – Prima facie the appellants are able to establish the case in their favour – Pre-deposits waived till the disposal – Stay granted. Issues:Waiver and stay sought by the appellant in relation to the demand under Rule 6(3) of the CENVAT Credit Rules, 2004 and penalty imposed.Analysis:1. The appellant sought waiver and stay regarding the demand of Rs.7,01,116/- under Rule 6(3) of the CENVAT Credit Rules, 2004 and the corresponding penalty. The appellant, engaged in pig iron manufacturing, generated un-granulated slag during the process, which was sold to cement manufacturers. The Revenue contended that un-granulated slag was an exempted final product attracting nil duty rate, and the appellant should have maintained separate accounts for dutiable and exempted products. The Revenue demanded 10% of the sale value of un-granulated slag cleared during the period due to the absence of separate accounts.2. The appellant argued that the un-granulated slag was not intentionally manufactured but generated as waste during pig iron production. They cited precedents where similar commodities were considered by-products or waste, not intentionally manufactured exempted goods. The tribunal found that Rule 6(3) should apply when a manufacturer produces both dutiable and exempted final products without separate accounts. The tribunal opined that the appellant did not manufacture un-granulated slag intentionally, leaning towards the appellant's view based on case law and lack of clarity in the show-cause notice and orders.3. The tribunal, after careful consideration, held that Rule 6(3) was not applicable in this case as un-granulated slag was not intended as a final product, but rather a by-product of pig iron manufacturing. The tribunal noted the marketability of un-granulated slag but questioned whether the appellant could be deemed to have 'manufactured' it. As a result, the tribunal granted waiver and stay as requested by the appellant, favoring their argument due to the lack of evidence supporting the Revenue's claim of intentional manufacturing of exempted goods.This detailed analysis of the judgment highlights the key arguments, legal interpretations, and the ultimate decision reached by the tribunal regarding the waiver and stay sought by the appellant in relation to the demand under Rule 6(3) of the CENVAT Credit Rules, 2004.