2015 (10) TMI 420

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.... of dispute in this case is from 2009-10 to 2011-12. The appellant were availing cenvat credit of duty paid on sponge iron and other inputs/input service. The department was of the view that since the appellant were using common inputs in relation to manufacture of dutiable goods (MS ingots) and exempted goods (Slag dust), and they are not maintaining separate accounts for inputs/input services used in the manufacture dutiable goods and exempted final products, in respect of clearance of slag dust an amount of 5% of the sale value of the slag dust cleared at nil rate of duty would be payable under Rule 6(3) of the Cenvat Credit Rules, 2004. It is on this basis, that the Deputy Commissioner vide Order-in-Original dt.31.1.14, confirmed the de....

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....on of rule 57CC would not be applicable in respect of mother liquor arising in the manufacture of gelatine, that the same view has been taken by Hon'ble Gujarat High Court in the case of CCE vs. Nirma Ltd.-2012 (281) ELT 654 (Guj.) wherein the High Court has held that when the entire quantity of input was used in the manufacture of a dutiable final product and an exempted by-product emerges during the process of manufacture, there was no question of maintaining separate accounts or paying a percentage of total price of the exempted by-product, that the Apex Court in the case of Hindustan Zinc Ltd. vs. Union of India-2014 (303) ELT 321 (SC) has held that when in the course of manufacture zinc or copper during calcinations of ore concentr....

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....S.Ingots, slag dust arises which is waste and the same is fully exempt from duty under Notification No.4/06-CE dt. 1.3.06. The department's case against the appellant is that since the cenvat credit availed inputs have been used for manufacture of dutiable and exempted final products and since the appellant have not complied with the provisions of sub-rule (2) of Rule 6, the provisions of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 would be applicable and invoking clause (i) of Rule 6(3), an amount of 5% of the total sale value of the slag dust cleared at nil rate of duty has been demanded. 6. In terms of sub-rule (2) of Rule 6, Where a manufacturer or provider of output service avails of CENVAT credit in respect of any input....

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.... manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of MS ingots, this is impossible as slag emergesd as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services conciously manufactures final products one dutiable and other exempt the two separate processes. But complying with Rule 6(2) is imp....