Inevitable waste in manufacture does not trigger Cenvat reversal or payment under Rule 6(3)(b) for clearance of residual products.

Waste products that arise inevitably during manufacture and are neither final products nor by-products do not attract the reversal or payment mechanism under Rule 6(3)(b) of the Cenvat Credit Rules, 2002. The commentary applies this principle to garnet rejects and gypsum generated in the manufacture of ilmenite and salt, treating them as residual waste rather than marketable excisable products. On that basis, the demand for 8% of sale price was considered inapplicable, and no amount was payable on clearance of such waste products.

---

---

Issues: Whether waste products emerging inevitably in the manufacture of dutiable final products attract the requirement of payment under Rule 6(3)(b) of the Cenvat Credit Rules, 2002.

Analysis: Garnet rejects and gypsum arose as waste products in the process of manufacture of Ilmenite and salt. They were not final products or by-products and their emergence was an inevitable consequence of the manufacturing process. The Board circular relied upon had treated press mud as residual waste and not as a marketable excisable product, and the same principle was applied to these waste products. On that basis, the rule invoked for demanding 8% of the sale price was held inapplicable.

Conclusion: Rule 6(3)(b) of the Cenvat Credit Rules, 2002 was not attracted, and no amount was payable on clearance of the waste products.

Final Conclusion: The common issue was decided in favour of the assessee, resulting in dismissal of the Revenue's challenge and allowance of the connected assessee's appeal with consequential relief.

Ratio Decidendi: Waste products that arise inevitably in manufacture and are neither final products nor by-products do not attract the reversal or payment mechanism under Rule 6(3)(b) of the Cenvat Credit Rules, 2002.

---