Incidental slag is not exempted goods under CENVAT credit rules when it arises as by-product or waste during manufacture.

Incidental slag arising during manufacture of the intended final product was treated as a by-product or waste, not as an independently manufactured exempted good. On that basis, clearance of the slag did not trigger reversal or payment under Rule 6(3) of the CENVAT Credit Rules, 2004. The Tribunal followed the settled position that use of inputs for the main final product does not convert incidental emergence of waste, refuse, or by-products into exempted goods merely because of amendments to the definition of excisable goods. The demand was therefore held unsustainable.

---

---

Issues: Whether slag arising in the course of manufacture of the main final product could be treated as exempted goods so as to attract reversal or payment under Rule 6(3) of the CENVAT Credit Rules, 2004.

Analysis: The dispute concerned clearance of ungranulated slag generated during the manufacture of the assessee's principal products. The decision turned on whether such slag was an intended manufactured final product or only a by-product or waste arising incidentally in the manufacturing process. The Tribunal applied the settled position that where inputs are used for the manufacture of the intended final product, incidental emergence of by-products, waste, or refuse does not convert such emergence into exempted goods for the purpose of demanding an amount under Rule 6(3). The Tribunal followed the binding ratio of the Supreme Court and subsequent Tribunal and High Court decisions holding that amendment to the definition of excisable goods does not by itself make waste or by-products liable as manufactured goods when they are not independently manufactured final products.

Conclusion: The slag cleared by the assessee was not liable to be treated as exempted goods for the purpose of Rule 6(3), and the demand was unsustainable.

---