TaxTMI 
TaxTMI 
2026 (9) TMI 1113
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.... is engaged in the manufacture of sugar confectionery falling under Chapters 17 and 18 of the CETA, 1985. It also manufactures 'processed milk', falling under Chapter Heading 0402, which is either captively consumed in the manufacture of sugar confectionery or supplied to its sub-contractors for further use. Processed milk was exempt from duty under Notification No.03/2006-CE dated 01.03.2006 and was accordingly treated as exempted goods for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. On verification of records, it appeared that the appellant had availed common input service credit for the manufacture of both dutiable and exempted goods without maintaining separate accounts. Accordingly, the provisions of Rule 6 were invoked an....
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.... in accordance with the prescribed formula, the Department could at best recover the differential amount of credit required to be reversed. There is no legal basis for demanding 6% of the value of the exempted goods. Non-maintenance of separate accounts for common input services, by itself, cannot justify such demand, particularly when the appellant had substantially complied with the reversal mechanism under Rule 6(3A). The adjudicating authority has also failed to consider the credit already reversed or quantify any alleged short reversal with reference to the prescribed formula. The demand of 6% is therefore unsustainable. C. The extended period is not invocable, as the appellant had in fact reversed credit and the dispute conce....
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....d the appeals. 5. The preliminary issue for consideration is whether "Processed Milk" can be regarded as an exempted final product for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. It is not in dispute that the said product is neither cleared nor sold as such. It arises at an intermediate stage and is either captively consumed in the manufacture of sugar-boiled confectionery or sent to job workers for use in such manufacture. 6. According to the appellant, fresh milk received in tankers is evaporated until it attains 70-74° Brix, where after sugar is added to improve shelf life. Fresh milk and sugar are the principal ingredients; no CENVAT credit is availed thereon, and separate accounts are maintained in respect thereo....
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....a process is so integrally connected with the ultimate production of goods that, but for such process, manufacture would be commercially inexpedient, articles required in that process fall within the expression "in the manufacture of goods". The ratio supports consideration of the manufacturing operation as an integrated whole. 10. Further, in Rallis India Ltd. Vs Union of India [2009 (233) E.L.T. 301 (Bom.)], as affirmed in Union of India Vs Hindustan Zinc Ltd., [2014 (303) E.L.T. 321 (S.C.)], it was held that a product which emerges unavoidably or as a technological necessity in the course of manufacture of the principal final product is in the nature of a byproduct, and the obligation to pay the prescribed amount under Rule 57CC of th....