TaxTMI 
TaxTMI 
2017 (7) TMI 677
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....lver crust emerges as a by-product which contains about 65-70% of lead, 10-15% of zinc, 5-7% of copper, 4-5% of silver and certain other impurities. Zinc and lead are recovered out of silver crust and thereafter silver emerges as a by-product during such elimination process. The silver so obtained was cleared by the respondent without payment of duty. The Revenue entertained a view that silver being an exempted product, the Cenvat credit attributable to inputs and input services used in the manufacture of such silver should be reversed in terms of provisions of Rule 57AD/Rule 6, as applicable during the relevant time. 2. Periodical show cause notices were issued to the respondent covering the period April 2000 to February 2003. The respondent of their own worked out the Cenvat credit attributable to the production of silver and reversed the same. An amount of Rs. 2,18,148/- was reversed on this account, during 2002-2003. Demand notices were adjudicated by the Original Authority who vide the impugned order dropped the proceedings against the respondent. He held that in terms of Rule 6 (2) of Cenvat Credit Rules, 2001, the inputs on which Cenvat credit has been availed are common to....
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....g at the cost of production for captive consumption with reference to allocation of joint cost to joint products. Similar methodology for arriving at proportionate credit should be adopted based on value of final products emerging using the common inputs. 4. The learned Counsel for the respondent strongly contested the grounds of appeal. He submitted that all the ore concentrates have been consumed in the manufacture of zinc and lead. There is no quantity of such inputs which are attributable to the manufacture of silver. As such, when they have consumed all the duty paid inputs and services, fully in the manufacture of their main final products, zinc and lead, there is no question of any inputs or services attributable to silver. Still, in order to close the matter without further dispute, the respondents reversed proportionate credit attributable to the inputs used for such silver. They have produced the Chartered Accountant certificate in support of their calculation. 5. Regarding applicability of the retrospective scheme for reversal of proportionate credit, as introduced in the Finance Act, 2010 it is submitted that the respondents have reversed Rs. 2,18,148/- during the fin....
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....by manufacturer an amount equal to Cenvat credit attributable to the inputs used in or in relation to the manufacture of exempted goods. It is apparent that the legal provisions applicable to the facts of the present case are clear to the effect that Cenvat credit attributable to inputs used in or in relation to manufacture of exempted goods is to be reversed. The relevant point to note here is that the Revenue itself categorically admitted in the appeal that it is not a case here, where common inputs are used both for the manufacture of dutiable and exempted goods in two separate processes. Segregation of quantity of inputs which is attributable to dutiable and exempted goods in an integrated process is not possible. The Revenue further admitted that quantification of proportionate quantity of input used in exempted goods is not possible in the case like the present one. However, after admitting these factual position, it is contended by the Revenue, that the criteria to find out proportionate quantity of input used in exempted goods should be based on value of exempted goods. We find no legal basis or logical reason for such a proposition. The Revenue drew a parallel from the CAS....
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....:- "26. Furthermore, the provisions of Rule 57CC cannot be read in isolation. In order to understand the scheme of Modvat credit contained in this Rule, a combined reading of Rules 57A, 57B and 57D along with Rule 57CC becomes inevitable. We have already reproduced Rule 57D above. It can be easily discerned from a combined reading of the aforesaid provisions that the terms used are 'inputs', 'final products', 'by-product', 'waste products', etc. We are of the opinion that these terms have been used taking into account commercial reality in trade. In that context when we scan through Rule 57CC, reference to final product being manufactured with the same common inputs becomes understandable. This Rule did not talk about emergence of final product and a by-product and still said that Rule 57CC will apply. The appellant seeks to apply Rule 57CC when Rule 57D does not talk about application of Rule 57CC to final product and by-product when the by-product emerged as a technological necessity. Accepting the argument of the appellant would amount to equating by-product and final product thereby obliterating the difference though recognised by the legislation itself. Significantly this int....