2019 (2) TMI 566 – CESTAT NEW DELHI – TMI – CENVAT Credit – removal of inputs as such – shale stone – Revenue was of the view that the shale stone which are not actually used by the appellant, are required to be considered as clearance of the inputs and are required to reverse Cenvat credit – Rule 3(5) of Cenvat Credit Rules – Held that:- Admittedly, Rule 3(5) of Cenvat Credit Rules requires reversal of credit when inputs in respect of which Cenvat credit has been taken, are removed “as such” from the factory. Admittedly, the Cenvat credit was availed on the coal and the coal was never removed from the factory. In such a scenario, the provisions of Rule 3(5) would not get attracted.
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Otherwise, also when the coal is issued for washing and screening and further preparation, it can be safely concluded that the inputs stand issued for utilisation in the manufacture of the final product. After the issuance of the inputs, if waste is generated during further processes, no reversal is
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of sponge iron. Coal is one of the inputs in the manufacture of the said final product. Coal became dutiable with effect from 1.3.2011 and prior to that there was no duty paid on the coal received by the assessee. However, with effect from 1.3.2011, the coal procured by the appellant was duty paid and the appellant was availing the benefit of Cenvat credit of duty paid on the same. 2. Before the use of the coal in the manufacturing activity, the same is required to be washed and screened, during which processes shale stone emerged. Thereafter, the cleaned coal is used. 3. The shale stones separated during the processing of coal are subsequently sold by the appellant as a waste product. Inasmuch as the appellant had taken the credit of the entire duty paid by the coal supplier, Revenue was of the view that the shale stone which are not actually used by the appellant, are required to be considered as clearance of the inputs and are required to reverse Cenvat credit to that extent in term
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e factory. In such a scenario, the provisions of Rule 3(5) would not get attracted. Otherwise, also when the coal is issued for washing and screeing and further preparation, it can be safely concluded that the inputs stand issued for utilisation in the manufacture of the final product. After the issuance of the inputs, if waste is generated during further processes, no reversal is required to be done in terms of Rule 3(5). The shale stones have emerged during the course of manufacture of the appellant s final product which stands initiated with the issuance of the coal. This legal issue stands clarified by the Board vide Circular No. 1029/17/2016-CX. dated 10.5.2016. Though, the same is in the context of segregation of impurities from honey grade brass scrap but the clarification equally applies to the facts of the present case. For better appreciation, para 3 and 4 of the said circular is reproduced below : 3. The issue has been examined. Segregation from honey grade brass scrap in or
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e feeding in the furnace cannot be treated as removal of inputs as such as envisaged under Rule 3(5) of CENVAT Credit Rules, 2004. The segregated foreign material in such situation, as has been explained above, shall be cleared on payment of Central Excise duty on transaction value as per its appropriate classification and rate of duty determined on merits. The issue also stands decided by the Tribunal in the case of Indo Rama Synthetics (I) Ltd. Vs. CCE, Nagpur – 2016 (336) ELT 541 (Tri.-Mumbai), wherein it was held that removal of the sludge settled at bottom of the tank during storage of oil cannot be held to be removal of the inputs as such so as to attract the provisions of Rule 3 of Cenvat Credit Rules, which require reversal only in case of removal of inputs as such . 6. In view of the above, I find no merits in the impugned order. The same are accordingly set aside. The appeal is allowed with consequential relief to the appellant. (Dictated & pronounced in open Court) – C
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