Rule 6 Cenvat credit inapplicable to aluminium dross because waste by-product is not marketable goods.

Rule 6 of the Cenvat Credit Rules, 2004 does not apply to aluminium dross generated as waste or by-product during manufacture because excisability depends on manufacture and marketability. Applying DSCL Sugar, the Tribunal treated waste arising in the manufacturing process as not itself the result of manufacture. It also noted that the earlier circular treating bagasse, dross and skimmings as exempted goods had been withdrawn after the Supreme Court found the 2016 circular unsustainable. Mere sale of aluminium dross did not establish marketability, so the duty demand on that basis could not be sustained.

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Issues: Whether Rule 6 of the Cenvat Credit Rules, 2004 applies to aluminium dross generated as waste/by-product during manufacture of aluminium products, and whether duty could be demanded on the footing that such dross was exempted goods.

Analysis: The demand rested on the premise that aluminium dross cleared for consideration was exempted goods attracting reversal under Rule 6. The governing principle, however, is that excisability depends on manufacture and marketability. The decision in DSCL Sugar was applied to hold that waste/by-product arising during manufacture is not itself the result of manufacture. The earlier circular treating bagasse, dross and skimmings as exempted goods stood withdrawn after the Supreme Court held the 2016 circular unsustainable. The Tribunal also relied on its own earlier view in the appellant's case that aluminium dross and skimmings are neither goods nor marketable commodities, and that mere sale of waste does not establish marketability.

Conclusion: Rule 6 of the Cenvat Credit Rules, 2004 was held inapplicable to aluminium dross, the duty demand could not be sustained, and the assessee succeeded.

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