Cenvat credit reversal on waste and by-products was held inapplicable, protecting credit on inputs used in manufacture.

Rule 6(3) of the Cenvat Credit Rules, 2004 was held inapplicable to clearance of waste, refuse, bagasse, pressmud and other by-products arising incidentally in manufacture, because such goods are not the final manufactured products and input credit cannot be denied merely on their clearance. The Tribunal distinguished cases involving independent non-excisable goods and relied on the CBEC clarification that credit remains admissible on inputs contained in waste or by-products. The demand for reversal of Cenvat credit was therefore set aside in favour of the assessees.

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Issues: Whether reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 was payable on clearance of waste, refuse, bagasse, pressmud and other by-products generated in the course of manufacture.

Analysis: The dispute turned on whether Rule 6(3) applied to goods that were not the manufactured final products but were only waste or by-products arising incidentally during the manufacturing process. The Tribunal followed its earlier view that, where the goods cleared are waste, refuse or by-products, the credit attributable to inputs used in manufacture cannot be denied merely because such incidental products are cleared. The reliance placed on the explanation inserted in Rule 6(1) and on the decision concerning non-excisable goods was distinguished, since the present case involved waste and by-products and not a claim relating to independent non-excisable manufactured goods. The Tribunal also noted the CBEC clarification that Cenvat credit remains admissible in respect of inputs contained in waste, refuse or by-product.

Conclusion: Rule 6(3) was held inapplicable to the clearance of waste or by-products, and the demand for reversal of Cenvat credit was set aside in favour of the assessees.

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