Residual manufacturing waste not treated as manufactured goods; Rule 6 CENVAT Credit reversal not required on clearance.

Waste and residual products arising incidentally during manufacture, such as wet bhoosi, chilka, dundli and malt sprouts, were treated as non-manufactured products and therefore outside the scope of excise duty as alleged. The Tribunal noted that the issue had already been settled by the Supreme Court for similar residual products and was also covered by the respondent's own case before the High Court. On that basis, Rule 6 of the CENVAT Credit Rules, 2004 was held inapplicable, so no reversal or payment was required on their clearance and the demand could not survive.

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Issues: Whether waste and residual products such as wet bhoosi, chilka, dundli and malt sprouts are exigible to excise duty and whether Rule 6 of the CENVAT Credit Rules, 2004 applies so as to require reversal or payment of an amount on their clearance.

Analysis: The dispute turned on the character of the impugned by-products/residuals arising during manufacture. The Tribunal noted that the question was already settled by the Supreme Court in relation to similar residual products, where such waste was held not to be a manufactured product and, therefore, outside the reach of Rule 6 of the CENVAT Credit Rules, 2004. The Tribunal also noted that the same issue stood covered in the respondent's own case by the High Court. In view of these settled principles, the demand for reversal/payment on clearance of the residual products could not survive.

Conclusion: The residual products were not liable to excise duty in the manner alleged, and Rule 6 of the CENVAT Credit Rules, 2004 did not apply. The Department's appeal was rejected.

Final Conclusion: The impugned order dropping the demand was affirmed and the revenue challenge failed.

Ratio Decidendi: Waste or residual products arising incidentally in the course of manufacture, which are not themselves manufactured products, do not attract Rule 6 of the CENVAT Credit Rules, 2004 merely because they are sold or arise during the manufacturing process.

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