2019 (8) TMI 1844 - AT - Central Excise

Tribunal rules in favor of tube manufacturer exempting payment for waste material

The Tribunal, in a case concerning interpretation of Rule 6(3) of Cenvat Credit Rules, ruled in favor of the appellant, a tube manufacturer, regarding ... CENVAT Credit - waste - duty paid on the common Cenvatable inputs used in the manufacture of excisable goods as also in the manufacture of said dross/skimming - failure to maintain separate records - non-excisable goods have to be treated as exempted goods or not - requirement to pay a particular percentage of the value of the zinc scrap - HELD THAT:- The issue stands decided by the earlier decision of the Tribunal. Particular reference can be made to the Tribunal decision in the case of M/S. APL APOLLO TUBES LTD. (UNIT-II) VERSUS COMMISSIONER OF GST & CENTRAL EXCISE [2019 (7) TMI 733 - CESTAT CHENNAI] vide which an identical situation was considered by the Tribunal and the dispute was resolved in favour of the assessee, where it was held that As per settled decisions, the goods which are not consciously manufactured by the appellants and which emerged in the process of manufacture cannot be considered as goods manufactured by the appellants. Thus, when the zinc scrap which is a waste arising out of process of manufacture of finished goods, is not goods manufactured by the appellant, the same cannot be considered as exempted goods manufactured by them. The impugned order is set aside - appeal allowed - decided in favor of appellant. Issues:Interpretation of Rule 6(3) of Cenvat Credit Rules regarding payment for waste material generated during manufacturing.Analysis:The appellant, engaged in tube manufacturing, generated unusable waste like flux skimming and zinc dross, which was sold. The Revenue contended that since the appellant availed Cenvat credit on common inputs used in manufacturing goods and waste, they must pay 10% of the waste material's value as per Rule 6(3) amendment from 01/03/2015, treating non-excisable goods as exempted. However, a previous Tribunal decision in a similar case favored the assessee, citing that waste arising during manufacturing cannot be considered goods manufactured by the appellant, thus exempt from payment.The Tribunal's decision in the case of M/s APL Apollo Tubes Ltd. referenced in the judgment highlighted that waste material like zinc scrap, emerging from the manufacturing process, is not consciously produced by the appellant and hence cannot be treated as goods manufactured by them. This aligns with the principle that waste arising incidentally during manufacturing is not the same as manufactured goods. The judgment emphasized that the amendment to Rule 6(3) did not alter the fact that waste material is not the primary product of manufacturing, thereby supporting the appellant's argument against payment for the waste material.Additionally, the judgment referred to another case involving sugar and molasses manufacturing, where the Tribunal upheld a similar view that waste like Bagasse and Press Mud, being agricultural residue, did not fall under the category of goods consciously manufactured by the appellant. This further solidified the stance that waste or by-products of manufacturing activities do not qualify as goods manufactured by the appellant, exempting them from payment obligations under Rule 6(3) of the Cenvat Credit Rules.In conclusion, the Tribunal, following precedent decisions and the principle that waste material arising incidentally during manufacturing is not equivalent to goods consciously manufactured, set aside the impugned order and allowed the appeal in favor of the appellant, granting consequential relief as per the law. The judgment, delivered on 09/08/2019 by Hon’ble Smt. Archana Wadhwa, Member (Judicial) of the Appellate Tribunal CESTAT ALLAHABAD, provides clarity on the treatment of waste material under Rule 6(3) of the Cenvat Credit Rules, ensuring fair application of tax regulations in cases involving waste generated during manufacturing processes.