Dated 15th November, 2019

 Subsequent judgment of the Apex Court cannot be used to re-open assessment or disturb past assessment which have been concluded-Department cannot be authorised to re-open the assessment, which stood closed on the basis of the law as it stood at the relevant time.

No circulars can override the Rules as well as the law laid down by the Hon’ble Supreme Court decisions1

Facts of the Case

In the present matter, the Appellants was engaged in the manufacture of sponge iron. They were availing Cenvat credit of duty paid on inputs and capital goods and service taxes paid on input services, as per Cenvat Credit Rules, 2004 and were utilizing such credit towards payment of duty on their final products.

Department observed that while using the said input of iron ore, the appellants were manufacturing dutiable final products, as well asthe exempted goods i.e. iron ore fines, but were not maintaining the separate accounts for the receipts, consumption and inventory of theinputs as is required in accordance of Rule 6 (3) of Cenvat Credit Rule, 2004.

Hence, it was alleged that during the period from April 2015to March, 2016, demand of specified percentage in terms of Rule 6(3) was raised on the Appellant for non maintenance of separate accounts. The demand was confirmed and thereafter on first appeal, relief was not granted. Aggrieved the matter was challenged before Delhi Tribunal (Principal Bench).

Contention of the Appellant

The iron ore fines are not distinct to iron ore. These are the residual by product material emerging onthe processing of iron ore. Thus, these are nothing more than a waste product during the manufacture of the final product, i.e.sponge iron. Hence, cannot be considered as the exempted goods and as such, Rule 6 (2) of CCR, 2004 is not attracted nor arises the question of imposition of penalty and recovery of interest.

Contentions of the Department

The subsequent circular of board bearing No.1027/15/2016-CX dated 25.04.2016 clarifies that "bagasse" cleared for consumption from the factory need to be treated like exempted goods for the purpose ofreversal of credit of input in terms of Rule 6 of Cenvat Credit Rules, 2004. It is impressed upon that there seems no infirmity in the order underchallenge. Appeal is prayed to be dismissed.

Tribunal Decision

The Tribunal relied on the Hon'ble Supreme Court's decision in the matter of DSCL Sugar Ltd. wherein it has been clearly laid down that bagasse is agricultural waste of sugarcane and the waste and residue of agricultural products, during the process of manufacture of goods cannot be said to be result of any process.

Similarly in the present case the iron fines are bound to emerge during crushing ofiron ore used for manufacturer of final product. No extra procedure is required for emergence of iron fines. Hence, the fines cannot be calledas manufactured product. The above decision of Hon'ble Apex Court shall squarely cover the facts and circumstances of present case. The Board's Circular dated 25.04.2016 has no application on the facts of the instant case for two reasons. Firstly, no Circular can override the Rules as well as the law laid down by the Hon'ble Supreme Court and the orders of this Tribunal, and secondly, the said Circular was issuedon 25.04.2016 i.e. on a later date, whereas the period in dispute is March, 2015 to June, 2015.

Further, the issue is no more res-integra.

The Tribunal at Mumbai relied uponM/s. Shivratna Udyog Ltd. & Others etc. vs. Commissioner, Customs and Central Excise – 2017 (9) TMI 985- CESTAT- Mumbaihas held as follows:-

"…….. if any input is contained in waste by product or goods the cenvat credit shall not be denied. If rule 6(3) is madeapplicable in these goods this clarification will stand redundant. If legislator has intention even to apply Rule 6(3) onwaste or by-product, refuse then either this para should have been amended or omitted. Since this clarification is still in force the Cenvat credit either by way of Rule 6(3) or otherwise cannot be denied. As per my above discussion, I amof the considered view that in case of removal of waste or byproduct Rule 6(3) has no application. Accordingly, the impugned orders are set aside. The appeals are allowed."

In view of the above discussion, the order under challenge was set aside and appeal was allowed.



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