Cenvat Credit Rule 6 does not apply to incidental waste or by-products cleared during manufacture.

Rule 6 of the Cenvat Credit Rules does not apply to iron ore fines that emerge incidentally as waste or segregated raw material during handling, sorting, grading and screening in the manufacture of sponge iron. Because the fines were not exempted final products and were unusable in the kiln, the provision did not require payment of 10% of their value on clearance. The challenge to the demand failed, and the relief granted to the assessee was sustained.

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Issues: Whether Rule 6(2) and Rule 6(3)(b) of the Cenvat Credit Rules apply to iron ore fines emerging as waste during manufacture, so as to require payment of 10% of their value on clearance.

Analysis: The iron ore fines arose only during handling, sorting, grading and screening of iron ore used as raw material for manufacture of sponge iron. They were found to be unusable in the assessee's kiln and to remain the same raw material in smaller size, emerging incidentally as inevitable waste or segregated raw material. The requirement of payment under Rule 6 was held to relate to exempted final products and not to waste or by-products emerging in the course of manufacture.

Conclusion: Rule 6 was not applicable to the iron ore fines, and no 10% payment was required on their clearance.

Final Conclusion: The Revenue's challenge failed and the order relieving the assessee from the disputed demand was sustained.

Ratio Decidendi: Rule 6 of the Cenvat Credit Rules does not fasten liability on waste or by-products that emerge incidentally during manufacture; the provision applies to exempted final products.

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