2007 (9) TMI 70 - AT - Central Excise

Appellate Tribunal excludes garnet and gypsum waste from Cenvat Credit Rule

The Appellate Tribunal, CESTAT Chennai, held that garnet and gypsum, as waste products emerging in the manufacturing process, were not subject to Rule ... Waste product - byproduct - marketability of residual waste - excisability - Rule 6(3)(b) of the Cenvat Credit Rules, 2002 - Board Circular accepting Titawi Sugar ComplexWaste product - byproduct - marketability of residual waste - Garnet and gypsum are waste products (residuals) emerging in the manufacture of ilmenite and salt and are not byproducts or final excisable products. - HELD THAT: - The Tribunal found as a fact that garnet was a residual left after electromagnetic separation of ilmenite ore and gypsum was the sediment remaining in salt pans after salt removal. The products emerge inevitably as residual waste in the manufacturing process and, on the material before the Tribunal, were not marketable final products comparable to byproducts. The Commissioner (Appeals) relied on the Board Circular which accepted the reasoning in Titawi Sugar Complex that press mud is a residual waste and not a byproduct; applying the same principle, garnet and gypsum were treated as non-excisable residual waste and not as byproducts attracting duty.Garnet and gypsum are residual waste products and not byproducts or excisable final products.Rule 6(3)(b) of the Cenvat Credit Rules, 2002 - excisability - Board Circular accepting Titawi Sugar Complex - Provisions of Rule 6(3)(b) CCR, 2002 do not apply to the clearance of garnet and gypsum in these facts, and no recovery under that rule is attracted. - HELD THAT: - Because the Tribunal held that the impugned materials are residual wastes and not marketable byproducts, the condition for invoking Rule 6(3)(b)-which would apply where exempted final products or byproducts emerge in the course of manufacture using common inputs-was not satisfied. The decision follows the reasoning in the Board Circular accepting the Titawi Sugar Complex view that residual press mud is not excisable; applying that approach, the Tribunal concluded that Rule 6(3)(b) is not attracted to the removals of garnet and gypsum in the periods under consideration.Rule 6(3)(b) CCR, 2002 is not attracted and no recovery under that rule is payable in respect of the garnet and gypsum removals in the present cases.Final Conclusion: The Revenue appeal E/290/05 is dismissed; the appeal E/1292/04 by the respondent is allowed; order-in-appeal sustaining the setting aside of the original demand in so far as it related to order-in-original No. 11/2004 is upheld, with consequential relief to the respondent. Issues:1. Interpretation of Rule 6(3) of the Cenvat Credit Rules, 2002 regarding the recovery of 8% of the sale price of gypsum and garnet.2. Determination of whether garnet and gypsum are marketable waste products and subject to excise duty under Rule 6(3)(b) of CCR.3. Analysis of whether waste products emerging in the manufacture of final products using common inputs attract the provisions of Rule 6(3)(b) of CCR.4. Consideration of the appeal filed by the Revenue against the impugned orders setting aside the demands for payment related to garnet and gypsum.Analysis:1. The appeal filed by the Revenue challenged the impugned orders setting aside demands for payment related to gypsum and garnet arising during the manufacture of salt and Ilmenite. The original authority had demanded 8% of the sale price of these waste products, invoking Rule 6(3) of the Cenvat Credit Rules, 2002. The Commissioner (Appeals) found that garnet and gypsum were waste products, akin to press mud, and not marketable or excisable. Relying on a Circular of the Board and a Supreme Court judgment, the Commissioner vacated the original orders.2. The ld. SDR contended that despite being waste products, garnet and gypsum were marketable and thus liable for excise duty under Rule 6(3)(b) of CCR. The argument was that the impugned products, though waste, were still subject to duty. However, the Commissioner had found that these waste products were not marketable and hence not excisable, leading to the orders being set aside.3. The counsel for the respondents argued that even if exempted byproducts emerged in the manufacturing process, excise law did not necessitate payment under Rule 6(3)(b) of CCR for their clearance. Citing a Tribunal decision, it was contended that if exempted byproducts manufactured using common inputs were removed, Rule 6(3)(b) was not attracted. The Tribunal had previously held that certain waste products arising in the manufacturing process were not subject to the said rule.4. The Tribunal, in considering the linked appeals, affirmed that garnet and gypsum were waste products emerging in the manufacturing process and not subject to Rule 6(3)(b) of CCR. It was clarified that these waste products were not final or byproducts, hence not attracting excise duty. Consequently, the appeal filed by the Revenue was dismissed, while the appeal by DCW was allowed with consequential relief, upholding the decision to set aside the demands related to garnet and gypsum.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI highlights the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2002 regarding the recovery of 8% of the sale price of waste products, the determination of marketability and excisability of garnet and gypsum, and the application of the rule to waste products emerging in the manufacturing process.