Iron ore fines from crushing and screening were not treated as exempted goods, defeating the Rule 6 demand.

Iron ore fines arising incidentally during crushing and screening of iron ore for sponge iron manufacture were treated as a by-product of segregation, not as goods produced by a manufacturing process directed at making the fines. A mere change in size or form of the same material was stated not to amount to manufacture unless the tariff specifically deems it so. As no exemption notification covering the fines was shown, they could not be treated as exempted goods for Rule 6 of the Cenvat Credit Rules, 2004, and the resulting demand was unsustainable.

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Issues: Whether iron ore fines generated during crushing and screening of iron ore for manufacture of sponge iron are separate excisable goods and exempted goods so as to attract the consequences under Rule 6 of the Cenvat Credit Rules, 2004.

Analysis: The disputed fines arose only during the segregation of iron ore lumps into the size required for feeding into the sponge iron kiln. The process did not involve any manufacturing activity directed at producing the fines, and the fines were only an incidental outcome of crushing and screening. A mere change in size or form of the same material does not ordinarily amount to manufacture unless the tariff specifically deems it so. The record also did not show any exemption notification covering the fines. In these circumstances, the fines could not be treated as exempted goods for the purpose of Rule 6, and the demand based on such assumption was not sustainable.

Conclusion: Iron ore fines were not excisable or exempted goods for the purpose of Rule 6 of the Cenvat Credit Rules, 2004, and the demand was unsustainable; the assessee succeeded.

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