Cenvat credit rule on waste clearance inapplicable where garnet rejects and gypsum arose only as manufacturing residue.

Garnet rejects and gypsum that arose inevitably as waste or residual products in the manufacture of ilmenite and salt were not treated as final products or as by-products for Rule 6(3)(b) of the Cenvat Credit Rules, 2002. On that basis, the obligation to pay 8% of the sale price on their clearance did not apply, and the demand could not be sustained. The rule was therefore inapplicable to the clearance of those waste products.

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Issues: Whether garnet rejects and gypsum, arising as waste products in the manufacture of ilmenite and salt, attracted Rule 6(3)(b) of the Cenvat Credit Rules, 2002 so as to justify demand of 8% of the sale price on their clearance.

Analysis: The disputed materials emerged inevitably in the course of manufacture as waste or residual products. They were not the final products of the assessee's manufacture, nor were they treated as by-products for the purpose of the rule. On the findings recorded, such waste products did not attract the obligation contemplated by Rule 6(3)(b) of the Cenvat Credit Rules, 2002. The demand raised on that basis could not be sustained.

Conclusion: Rule 6(3)(b) was held inapplicable to the clearance of garnet rejects and gypsum, and the demand was set aside in favour of the assessee.

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