Iron ore fines from screening are not exempted goods; Rule 6 reversal under Cenvat Credit Rules does not apply.

Iron ore fines generated during screening and segregation of run-of-mine iron ore were treated as an unavoidable by-product or waste, not as a manufactured product brought into existence by a process amounting to manufacture under Section 2(f) of the Central Excise Act, 1944. As they were not regarded as exempted goods, the bar in Rule 6(3) of the Cenvat Credit Rules, 2004 did not apply. Accordingly, reversal of credit or payment calculated as a percentage of the value of the fines was held unsustainable.

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Issues: Whether iron ore fines generated during screening of iron ore are exempted goods so as to attract Rule 6 of the Cenvat Credit Rules, 2004 and require reversal or payment based on their value.

Analysis: Iron ore fines arose during the process of screening and segregation of run of mine iron ore to make the ore fit for use in the furnace. The fines were held to be an unavoidable by-product or waste product and not a manufactured product brought into existence by any process amounting to manufacture under Section 2(f) of the Central Excise Act, 1944. Since the fines were not treated as exempted goods, the embargo under Rule 6(3) of the Cenvat Credit Rules, 2004 was held inapplicable.

Conclusion: Rule 6 of the Cenvat Credit Rules, 2004 does not apply to the iron ore fines generated during screening, and the demand based on 5% / 6% of their value is unsustainable.

Ratio Decidendi: Fines arising as an unavoidable by-product or waste during screening, without a manufacturing process creating a distinct excisable product, are not exempted goods for the purposes of Rule 6 of the Cenvat Credit Rules, 2004.

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