2018 (1) TMI 490 - HC - Central Excise

Court Upholds Decision on Cenvat Credit Rule 6 Interpretation

The High Court upheld the Tribunal's decision in a case concerning the interpretation of Rule 6 of the Cenvat Credit Rules, 2004. The issue revolved ... CENVAT credit - manufacture of taxable as well as exempt goods - waste - chhilka, dundli, bhushi and sprout - Rule 6(3) of the Rules - Held that: - the Tribunal relying upon the decisions of the Bombay High Court in Hindalco Industries Limited vs. Union of India, [2014 (12) TMI 657 - BOMBAY HIGH COURT] held that for the by-products i.e. chhilka, dhundli, bhushi and sprout emerging during the manufacturing of malt and malt extract, the assessee is not liable to pay 10% of the value of the said goods - appeal dismissed - decided against Revenue. Issues:1. Interpretation of Rule 6 of Cenvat Credit Rules, 2004 for clearance of excisable by-products.2. Liability to pay 10% of the total value of excisable goods cleared at 'NIL' rate of duty.Analysis:Issue 1:The appeal involved the interpretation of Rule 6 of the Cenvat Credit Rules, 2004 regarding the clearance of excisable by-products arising during the manufacturing process. The respondent-assessee, engaged in manufacturing Malt and Malt extract, availed Cenvat Credit on inputs, capital goods, and input services. The waste generated during manufacturing, such as Chhilka, Dundli, Bhushi, and Sprout, attracted a nil rate of duty. The appellant-revenue contended that as the assessee produced both dutiable and exempted products, they were required to pay 10% of the value of exempted goods as per Rule 6(3) of the Rules. However, the Tribunal, citing judgments from the Bombay and Allahabad High Courts, ruled in favor of the respondent. The High Court noted that in similar cases, such as Balrampur Chini Mills Limited and Hindalco Industries Limited, it was held that by-products emerging during manufacturing processes did not attract the obligation to pay 10% of their value as they were not considered excisable goods, and hence, the Rules were not applicable.Issue 2:The second issue revolved around the liability to pay 10% of the total value of excisable goods cleared at a 'NIL' rate of duty. The respondent-assessee had cleared exempted products valued at Rs. 2,32,09,621/- at a nil rate of duty without paying the required 10% of the total value, leading to a show cause notice and subsequent adjudication confirming a demand of Rs. 23,20,963/- along with penalties and interest. The Commissioner (Appeals) upheld this decision. However, the Tribunal, based on the aforementioned judgments, allowed the appeal filed by the respondent. The High Court, after considering the arguments presented by the appellant-revenue, found no grounds to challenge the Tribunal's decision, as the applicability of the judgments from the Bombay and Allahabad High Courts remained uncontested. Consequently, the High Court dismissed the appeal, stating that no substantial question of law arose in the case.