TaxTMI 
TaxTMI 
2026 (8) TMI 234
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....ion 11A of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, together with applicable interest under Section 11AA of the Act, and further upheld the imposition of penalty of an equivalent amount of Rs.15,64,411/- under Section 11AC of the Act. 2.1 During the period from March 2011 to March 2013, coal gas emerged as an inevitable by-product in the course of manufacture of coke by the appellant. The said coal gas, attracting nil rate of duty, was supplied by the appellant pursuant to contractual arrangements with Alloy Steel Plant, Durgapur, a unit of Steel Authority of India Ltd. The appellant, treating the said coal gas as exempted goods, discharged its obligations under Rule 6(3) of the Cenvat Credit Rules, 2004 by paying an amount equivalent to the prescribed percentage of the value thereof, adopting for such purpose the value stipulated under the relevant contractual arrangements. The dispute in the present proceedings arises from the Department's allegation that the appellant had undervalued the said coal gas while computing the amount payable under Rule 6(3) of the Cenvat Credit Rules, 2004 and had consequently short-paid an amount aggregating t....
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....s arises inevitably during the process of manufacture of coke and is not independently manufactured as a final product. Consequently, the very foundation of the impugned demand fails, inasmuch as Rule 6(3) itself is inapplicable to an inevitable by-product and no amount could have been demanded there-under irrespective of the value adopted for such clearances. 3.3 He further submits that without prejudice to the aforesaid contention, it is now well settled that the notional percentage-based amount for reversal prescribed under Rule 6(3)(i) cannot be mechanically imposed by the Department merely because an assessee has not maintained separate accounts or has allegedly failed to comply with the prescribed procedure. In Tiara Advertising v. Union of India, 2019 (30) G.S.T.L. 474 (Telangana), as affirmed and relied upon by the Hon'ble Calcutta High Court in Commissioner of Service Tax-I, Kolkata v. Surya VistacomPvt. Ltd., 2022 (66) G.S.T.L. 290 (Cal.), it was held that Rule 6(3) of the Cenvat Credit Rules, 2004 merely provides options to an assessee for reversing notional amounts calculated at a prescribed percentage of input tax credit, and that the Department cannot choose on....
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....le 6(3) of the Cenvat Credit Rules, 2004 inapplicable. In any event, the Department could not have mechanically invoked the percentage-based demand contemplated under Rule 6(3)(i) without adhering to the statutory scheme governing attribution and reversal of common credit. The impugned demand of Rs.15,64,411/-, together with interest and penalty, is therefore liable to be set aside in its entirety. He, therefore, prays for setting aside the impugned order by allowing their appeal with consequential benefits. 3.6 The ld.A.R. for the Revenue has justified the impugned order. 4. Heard both the parties and considered the submissions. 5. We find that it is not in dispute that the appellant is manufacturing coke and in respect of manufacture of coal gas, the appellant is paying duty on the clearance of coal gas on the value arrived as per the contract of the principal manufacturer, who supplied the raw materials to the appellant. Therefore, the issue arises whether the coal gas emerges during the course of manufacture of coal being a by-product, the appellant is liable to pay duty in terms of Rule 6(3) of the Cenvat Credit Rules, 2004 or not ? 6. The said issue has been exami....
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....t to be recovered from the appellant. 10.3 Against the said order, the appellant is before us. 11. The ld.Counsel for the appellant submits that Rule 10A read with Rule 8 of Valuation Rules, are not applicable to the facts and circumstances of the present case. It is his submission that the appellant entered into an agreement with M/s Usha Martin Limited manufactured lam coke on job work basis out of coking coal supplied by the latter and cleared the goods on payment of duty. He further submits that it is not the case of the Revenue that the subject goods at the stage of their clearance by the appellant, were sold by the appellant to third party/independent buyers or that the said goods were transferred to any depot, consignment agent or any other premises from where they were to be sold in the manner contemplated under Rule 10A(i) or Rule 10A(ii) of the said Valuation Rules. He further submits that the sole basis on which the differential duty demands came to be raised and sustained us the Department's contention that since the goods has been manufactured by the appellant on job-work basis and were cleared to the principal manufacturer, valuation shall to be taken under Rule....