Rule 6 Cenvat credit does not apply to iron ore fines arising as waste or by-product during screening and processing.

Iron ore fines generated as an unavoidable by-product or waste during screening and segregation were not treated as manufactured exempted goods, because no separate excisable commodity came into existence through a process of manufacture. On that basis, Rule 6 of the Cenvat Credit Rules, 2004 did not apply merely because the fines were sold, and reversal or payment of an amount from common input service credit was not required. The stated principle is that waste, residue, or incidental by-product arising in processing does not trigger Rule 6 obligations unless it amounts to manufacture of exempted final products.

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Issues: Whether iron ore fines generated during screening of iron ore constitute exempted goods so as to attract Rule 6 of the Cenvat Credit Rules, 2004 and require reversal or payment of an amount on common input services credit.

Analysis: Iron ore fines arose as an unavoidable by-product or waste during screening and segregation of iron ore to make it fit for use in the furnace. They were not shown to be the result of any manufacturing process or a separate excisable commodity brought into existence by application of labour and process. Since the fines did not answer the character of manufactured exempted goods, the bar under Rule 6 did not apply merely because the fines were sold. The reasoning adopted aligned with the principle that waste or residue emerging in the course of handling or processing does not, by itself, attract reversal obligations under Rule 6 where no manufacture of exempted final products is involved.

Conclusion: Rule 6 of the Cenvat Credit Rules, 2004 was held inapplicable to the iron ore fines, and no amount at 5% or 6% of their value was payable; the Revenue's challenge failed.

Ratio Decidendi: Material that emerges only as waste, residue, or an unavoidable by-product during processing, without constituting manufacture of exempted goods, does not attract Rule 6 reversal obligations for common input service credit.

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