2019 (2) TMI 566 - AT - Central Excise

Tribunal rules in favor of appellant on Cenvat credit reversal for shale stones

Devi Iron & Power (P) Ltd. Versus CC, CGST & CE, Raipur

Devi Iron & Power (P) Ltd. Versus CC, CGST & CE, Raipur - TMI Issues:1. Whether the appellant is required to reverse Cenvat credit for shale stones sold as waste productsRs.2. Applicability of Rule 3(5) of Cenvat Credit Rules regarding clearance of inputs 'as such.'3. Interpretation of legal provisions in the context of waste products generated during manufacturing processes.Analysis:1. The case involved a dispute regarding the reversal of Cenvat credit for shale stones sold as waste products by the appellant. The Revenue contended that since the shale stones emerged during the processing of coal, for which the appellant availed Cenvat credit, the credit needed to be reversed. The appellant argued that the shale stones emerged from coal procured before duty imposition, and Rule 3(5) of Cenvat Credit Rules did not apply as the coal was not removed from the factory.2. The Tribunal analyzed Rule 3(5) of Cenvat Credit Rules, which mandates credit reversal when inputs are removed 'as such' from the factory. It was established that the appellant availed Cenvat credit on coal but did not remove it from the factory. The Tribunal concluded that the provisions of Rule 3(5) did not apply in this scenario. The legal interpretation was supported by a circular clarifying the treatment of process waste, emphasizing that waste generated during manufacturing processes does not necessitate credit reversal.3. The Tribunal referred to a previous case where it was held that the removal of waste products, like the sludge settled during oil storage, did not constitute the removal of inputs 'as such' under Rule 3 of Cenvat Credit Rules. Drawing parallels, the Tribunal determined that the shale stones generated during the manufacturing process of the final product did not require credit reversal. Citing the circular and legal precedent, the Tribunal set aside the impugned orders, allowing the appeal with consequential relief to the appellant.In conclusion, the judgment clarified the application of Rule 3(5) of Cenvat Credit Rules in cases involving waste products generated during manufacturing processes. It emphasized that credit reversal is not mandated for waste materials emerging during manufacturing, provided the inputs were not removed 'as such' from the factory. The decision was based on legal interpretations, circular guidance, and precedent, ensuring a fair resolution in favor of the appellant.