2023 (7) TMI 1172 - AT - Central Excise

Tribunal allows appeals on iron ore fines classification, dismisses interest and penalties demand.

BIOP Steels & Power Pvt Ltd. Versus Commissioner of Central Tax Tirupati – GST

The Tribunal allowed the appeals, setting aside previous orders and granting consequential relief. It held that iron ore fines, not considered ... CENVAT Credit - liability to pay an amount in terms of Rule 6 in respect of “iron ore fines” being cleared by them on receipt of consideration or otherwise - whether the iron ore fines cleared by the appellants were manufactured goods or not and if they were not, whether they would still be subjected to Rule 6 of CCR, both before 01.04.2015 and after 01.04.2015 or otherwise? HELD THAT:- The iron ore fines emerging in the course of sieving/screening of iron ore lumps, cannot be considered as manufactured goods or as manufactured final goods. Therefore, relying on the decision in COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS SELENO STEELS LTD. [2013 (3) TMI 258 - CESTAT NEW DELHI] and TATA METALIKS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-II [2010 (1) TMI 1065 - CESTAT MUMBAI], it would clearly not be covered by Rule 6 for period before 01.04.2015. Even for the period after 01.04.2015 were such “non-excisable goods” which are to be treated as “exempted goods”, would still not be covered under Rule 6 for the purpose of reversal of credit or payment of an amount equivalent by relying on the ratio in the case of M/S BALRAMPUR CHINI MILLS LTD. THROUGH ITS GENERAL MANAGER VERSUS UNION OF INDIA, MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (5) TMI 972 - ALLAHABAD HIGH COURT], and UNION OF INDIA VERSUS DSCL SUGAR LTD. [2015 (10) TMI 566 - SUPREME COURT] Essentially, unless the good is a manufactured goods, Rule 6 of CCR cannot be made applicable. Even when it is not manufactured and it is refunded to as non-excisable goods, which are required to be treated as the exempted goods, after 01.03.2015, it will not be covered in as much as the “exempted goods” themselves are also required to be manufactured goods first. Therefore Rule 6 would not be applicable in the given facts of the case. Thus, it is clear that there is no manufacturing process involved and therefore the iron ore fines being cleared for a consideration, is not a manufactured goods. Further, respectfully following the ratio of Hon’ble Supreme Court and High Court, unless there is a manufactured product, Rule 6 cannot be invoked. Admittedly, amendment in CCR 2004 with effect from 01.04.2015 has brought “non-excisable goods” also under the ambit of “exempted goods” but the said exempted goods has also to emerge as a consequence of some manufacturing process. The Revenue has not been able to establish that the iron ore fines were “manufactured goods”, which were exempted during the material time and infact they have relied mostly on the amendment made in the CCR 2004 with effect from 01.04.2015 for confirming the demand which also does not help. Since the matter is being decided on merits itself, other arguments on the grounds of limitation, penalties etc are not being considered. Further, with demand not sustaining on merits itself, demand for interest and penalties will also not survive. Appeal allowed. Issues Involved:1. Whether iron ore fines are manufactured goods or non-excisable goods.2. Applicability of Rule 6 of Cenvat Credit Rules (CCR) 2004 to iron ore fines.3. Impact of amendments to CCR 2004 post 01.04.2015 on the treatment of iron ore fines.Summary:Issue 1: Whether Iron Ore Fines are Manufactured Goods or Non-Excisable GoodsThe appellants, engaged in manufacturing sponge iron, generate iron ore fines during the process of crushing/screening/grading iron ore lumps. The key contention was whether this process constitutes 'manufacture.' The Commissioner (Appeals) and the Tribunal, relying on various precedents, concluded that iron ore fines are not a result of a manufacturing process but are non-excisable goods. The Tribunal referenced multiple judgments, including *CCE & ST, Raipur Vs Aarti Sponge and Power Ltd.*, which held that the emergence of iron ore fines does not amount to manufacture.Issue 2: Applicability of Rule 6 of CCR 2004 to Iron Ore FinesRule 6 of CCR 2004 mandates payment of an amount equivalent to 6% of the value of exempted goods if separate accounts are not maintained. The Commissioner (Appeals) and the Tribunal examined whether this rule applies to iron ore fines. The Tribunal, citing the *Union of India Vs DSCL Sugar Ltd.* case, concluded that Rule 6 applies only to manufactured goods. Since iron ore fines are not manufactured goods, Rule 6 was deemed inapplicable.Issue 3: Impact of Amendments to CCR 2004 Post 01.04.2015Post-amendment, 'non-excisable goods' cleared for consideration were included under 'exempted goods' per Rule 6. However, the Tribunal, following the ratio in *DSCL Sugar Ltd.* and *Balarampur Chini Mills Ltd.*, held that even post-amendment, Rule 6 applies only if the goods are manufactured. Since iron ore fines are not manufactured goods, the amendments do not alter their treatment under Rule 6.Conclusion:The Tribunal set aside the orders dated 23.10.2019, 28.10.2020, and 29.03.2022, and allowed the appeals with consequential relief. The judgment emphasized that iron ore fines, not being manufactured goods, are not subject to Rule 6 of CCR 2004, even after the amendments effective from 01.04.2015. The demand for interest and penalties was also dismissed.Order Pronounced:(Order pronounced in the open court on 26.07.2023)