Custom, Excise & Service Tax Tribunal
B I O P Steels & Power Pvt Ltd vs Commissioner Of Central Tax-Tirupati - ... on 26 July, 2023
(1) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Single Member Bench
Excise Appeal No. 30237 of 2020
(Arising out of Order-in-Appeal No.TTD-EXCUS-000-APP-047-19-20, dated 23.10.2019
passed by Commissioner of Central Tax & Customs (Appeals), Guntur)
BIOP Steels & Power Pvt Ltd., .. APPELLANT
Survey No. 141,
Near S H 19,
Obulapuram Village,
Rayadurgam, Anantapur,
Andhra Pradesh - 515 865.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Tirupati - GST No. 9/86, West Church Complex, Amaravathi Nagar, MR Palli Road, Thirupathi, Chittor, Andhra Pradesh - 517 502.
Excise Appeal No. 30334 of 2021 (Arising out of Order-in-Appeal No.TTD-EXCUS-000-APP-030-2020-21, dated 28.10.2020 passed by Commissioner of Central Tax & Customs (Appeals), Guntur) BIOP Steels & Power Pvt Ltd., .. APPELLANT Survey No. 141, Near S H 19, Obulapuram Village, Rayadurgam, Anantapur, Andhra Pradesh - 515 865.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Tirupati - GST
No. 9/86, West Church Complex,
Amaravathi Nagar, MR Palli Road,
Thirupathi, Chittor,
Andhra Pradesh - 517 502.
Excise Appeal No. 30214 of 2022
(Arising out of Order-in-Appeal No.TTD-EXCUS-000-APP-014-21-22, dated 29.03.2022 passed by Commissioner of Central Tax & Customs (Appeals), Guntur) BIOP Steels & Power Pvt Ltd., .. APPELLANT Survey No. 141, Near S H 19, Obulapuram Village, Rayadurgam, Anantapur, Andhra Pradesh - 515 865.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Tirupati - GST
No. 9/86, West Church Complex,
Amaravathi Nagar, MR Palli Road,
Thirupathi, Chittor,
Andhra Pradesh - 517 502.
APPEARANCE:
(2) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
Shri M S Nagaraja, Advocate for the Appellant.
Shri V R Pavan Kumar, Authorised Representative for the Respondent.
CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30193-30195/2023 Date of Hearing:22.06.2023 Date of Decision:26.07.2023 [ORDER PER: A.K. JYOTISHI] M/s BIOP Pvt Ltd., hereinafter referred to as appellant, have filed three appeals before this Tribunal namely Appeal No. E/30214/2022, E/30334/2021 & E/30237/2020. These three appeals are interlinked and therefore Learned Advocate requested for taking up these three appeals together as they all have common issue. He also took this Bench through the history of these appeals. The first Show Cause Notice dated 13.01.2016 was issued by the Department for the period January 2015 to October 2015 and the same was confirmed by the Original Authority vide Order-in-Original dated 30.06.2016. In respect of this Order-in-Original, the appellant went into appeal and an order was passed by the Commissioner (Appeals) dated 29.03.2022. This order of Commissioner (Appeals) has been appealed against in Appeal No. E/30214/2022.
2. For the subsequent period November 2015 to June 2017, the Show Cause Notice was issued vide Show Cause Notice No. C.No.V/72/15/07/2018-ADjn dated 03.04.2018 and confirmed vide Order-in- Original dated 29.11.2018. However, on appeal the matter was remanded to the Original Authority by the Commissioner (Appeals), who again passed Denovo Order-in-Original dated 17.03.2020 and against the said Order-in- Original appellant went in appeal before Commissioner (Appeals), and thereafter the order dated 28.10.2020 has been passed by the Commissioner (Appeals). Against this order of Commissioner (Appeals), the appellants have filed Appeal No. E/30334/2021.
3. They have also filed an Appeal No. E/30237/2020 in respect of Order- in-Appeal dated 23.10.2019.
4. The facts, in brief, are that the appellants are engaged in the manufacture of sponge iron and are using iron ore lumps as input in the process of manufacturing sponge iron. In the process of crushing/screening/grading of iron ore lumps, there is an emergence of "iron (3) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 ore fines" which they are selling commercially as they cannot use it for manufacturing sponge iron. They are also availing the cenvat credit on common input service used in manufacturing and clearance of sponge iron as well as on so called exempted goods i.e. iron ore fines. Therefore, in terms of Rule 6(1) and 6(3) of Cenvat Credit Rules 2004, they were required to pay an amount equivalent to 6% of the value of the exempted goods. It was also noted that since they had not maintained any separate account, the only option available to them was to pay an amount equivalent to 6%. The Original Authority relied on the definition of "excisable goods" in Section 2(d) of Central Excise Act after the addition of an explanation with effect from 10.05.2008 for coming to the conclusion that the iron ore fines, in the facts of the case, was an excisable good. Further, since this excisable good was exempted in terms of Notification No. 12/2012 dated 17.03.2012, therefore in terms of Rule 6(3) of CCR, the appellants were required to pay an amount equal to 6% of the value of the exempted goods sold by them at the time of it's clearance.
5. The Commissioner (Appeals), vide his order dated 29.03.2022, interalia, held that the input namely iron ore lumps are required to be subjected to crushing/sieving etc., to segregate ores of size less than 10mm as they cannot be used in the process of manufacture. He also noted that there was no dispute about the facts that the iron ore fines would emerge during the manufacture of sponge iron and that the appellant was not manintaining separate accounts. On the issue of whether the process can be called as manufacture or otherwise, he observed that appellant has not cleared the raw material procured by them as such, and they were in fact put to the process of screening/sieving etc to remove iron ore fines of less than 10mm. Para 12 of Order-in-Appeal is quoted below for understanding the reasons adopted by Commissioner (Appeals):
"12. The main contention that the appellant put forth in the case is that the impugned goods are not emerging as a resultant product of a process/processes amounting to manufacture. If the said argument is accepted, the conclusion that can be arrived is that the impugned goods can be termed as non-excisable goods. At this juncture, it is relevant to refer to the explanation 1 after proviso under Rule 6(1) of the Cenvat Credit Rules, 2004 "Explanation 1 - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory."
(4) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
The effect of the above stated explanation is that the term 'exempted goods' shall also include 'non-excisable goods'. Therefore, an assessee clearing non-excisable goods is also required to pay an amount equal to @ 6% on the value of such non-excisable goods, if the assessee does not maintain separate accounts of inputs/input services used for production of such non-excisable goods, as the said term is defined as to include in the term 'exempted goods' defined under Rule 2(h) of the said Credit Rules. In the instant case, there is no dispute on the fact that the appellant has not maintained separate accounts of the goods/services used in the production of the impugned goods. Therefore, even if the goods are held to be non-excisable, as contended by the appellant, the appellant is liable to pay the amount at the rate prescribed under Rule 6 of the Cenvat Credit Rules, 2004, on the impugned goods at the time of their clearance. There is no contention on the part of the appellant that the Iron Ore Fines are not non-excisable, and, consequently, are not covered under above said rule by virtue of the Explanation 1 therein."
The Commissioner (Appeals) therefore upheld the order dated 30.06.2016 where the same was confirmed holding iron ore fines as excisable goods, though exempted.
6. For the subsequent period, the Show Cause Notice dated 03.04.2018 was issued on the identical issue. However, this Show Cause Notice also relied on the changes in terms of Notification No. 13/2016-CE(NT) dated 01.03.2016, vide which the CCR were amended with effect from 01.04.2016 and also on amended Rule 6(3)(i) of CCR 2004 vide Notification No. 23/2016-CE(NT) dated 01.04.2016. In respect of this Show Cause Notice also, the Original Authority, interalia, held that the iron ore fines produced were "excisable goods" which were exempted from payment of central excise duty by virtue of notification and in the given circumstances, provisions containing Rule 6(i), 6(ii) and 6(iii) of CCR are automatically attracted therefore the demand was confirmed.
7. In appeal, the Commissioner (Appeal) vide his order dated 23.10.2019 placing his reliance on the amendment in Rule 6 with effect from 01.03.2015, interalia, held that even in the case of "non-excisable goods"
cleared for consideration, same has to be treated like "exempted goods" for the purpose of reversal. He, however, felt that the Original Authority has not taken into account insertion of Rule 6(3AA) in Rule 6 ofCCR 2004 with effect from 01.03.2015 and therefore remanded the matter back to the Original Authority to re-determine the credit required to be reversed as per the formulae given under Rule 6(3)(A). Against this Order-in-Appeal also, the appellants have filed appeal before this Tribunal i.e. E/30237/2020.
(5) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
8. In the Denovo proceedings, the Original Authority vide his Order-in- Original dated 17.03.2020, interalia, held that the reversal was required in the facts of the case and re-determined the amount required to be reversed in view of insertion to Rule 6(3AA) as per Rule 6(3A) in CCR and thereafter confirmed the demand of Rs. 2,35,777/- alongwith penalty, interest etc based on detailed calculation. In para 3 of the said Order-in-Original, he has also noted that the Committee of Commissioners have accepted the order of the Commissioner (Appeals) on merits and hence proceeded to comply with the observations and directions in the remand order.
9. The main issue common to all the three appeals is that whether the appellants were liable to pay an amount in terms of Rule 6 in respect of "iron ore fines" being cleared by them on receipt of consideration or otherwise. Some of the admitted facts are that they were engaged in the manufacture of sponge iron for which they are procuring iron ore lumps. They are also incurring certain expenses on transportation etc in respect of these inputs and were taking credit of service tax paid. Further, as they were not able to use iron ore of certain diameters, they carried out screening/sieving of the iron ore lumps in order to segregate iron ore above 10mm and below 10mm. The iron ore below 10mm, which cannot be used by them in their process of manufacturing sponge iron, was being cleared as "iron ore fines" on receipt of consideration. The iron ores above 10mm were being used in the process of manufacturing sponge iron. It is also admitted fact that they have not maintained separate account for so called exempted goods and dutiable goods.
10. Learned DR has forcefully argued that post amendment in CCR 2004 with effect from 01.04.2015, the exempted goods will also include "non- excisable goods" cleared from the factory. Therefore, the iron ore fines, even if treated as non-excisable goods, will still be governed by the provisions of Rule 6 and therefore an amount will be required to be paid at the time of clearance of non-excisable goods. He has also relied on Circular No. 1027/15/2016, dated 25.04.2016 from the Central Board of Excise and Customs in support that non-excisable goods, when cleared for consideration, need to be treated like exempted goods for the purpose of reversal of credit of inputs in terms of Rule 6. He has also cited a judgment in the case of Satavahana Ispat Ltd.,Vs CT, Tirupati GST [2019 (3) TMI 100 CESTAT-HYD], where in the identical facts of the case, this Tribunal relying (6) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 on certain previous judgments, interalia, held that post 01.03.2015, even for iron ore fines, reversal of cenvat credit is necessary.
11. In the order relied upon Tribunal did not upheld reversal prior to 01.03.2015 but only post 01.03.2015, holding iron ore fines as "non-
excisable goods" cleared for consideration and therefore liable for reversal under Rule 6. Essentially, this order also holds that process did not amount to manufacture and iron ore fines were therefore, non-excisable goods and were not exempted goods. As far as his reliance on M/s Emami Ltd., Vs C.C.EX., KOL.III [2019 (6) TMI 1616-CESTAT Kolkata] is concerned, the Tribunal essentially held that goods can be exempted only if it was otherwise dutiable. Therefore, for the period prior to 01.03.2015, iron ore fines were not "excisable goods" for the purpose of reversal under Rule 6. The reliance placed on Hon'ble Supreme Court judgment in the case of Commissioner of Sales Tax, Bombay Vs Bharat Petroleum Corpn. Ltd., [1995 (77) ELT 790 (SC)] and Collector of C.Ex, Kanpur Vs Gayatri Glass Works [1999 (114) ELT 786 (SC)] is also not correct as the facts are clearly distinguishable.
12. On the other hand, Learned Advocate for the appellant is mainly relying on few aspects. Firstly, that Department has failed to establish that there is a "process of manufacture" involved and in the absence of any manufacture, there is no applicability of Rule 6 of CCR 2004. In support of their contention that when any process does not amount to manufacture, Rule 6 is not applicable, the appellants have mainly relied on Hon'ble Supreme Court's judgment in the case of UOI Vs DSCL Sugar Ltd., [2015 (322) ELT 769 (SC)]. They have also relied on the case of Balarampur Chini Mills Ltd., Vs UOI [2019 (368) ELT 276 (ALL)], which also relied on this judgment .
13. Further, it is apparent from the order of the Commissioner (Appeals) dated 23.10.2019, vide which the matter was remanded back to the Original Authority for Denovo proceedings, the observations and decision of the Commissioner (Appeals) was finally accepted by the Department and followed by Original Authority. Therefore, the order of the Commissioner (Appeals) holding that in the given facts of the case, the iron ore fines emerging in the case of screening of iron ore lumps, even if treated as a "non-excisable goods", was still covered under Rule 6 post 01.03.2015. Therefore, there is no reason to decide whether in the given facts of the case, any manufacturing process was involved or not. However, appellants (7) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 have cited many case laws in support of their contention that the process involved is not amounting to manufacture. Following case laws have been cited:
i) CCE & ST, Raipur Vs Aarti Sponge and Power Ltd., [2016 (333) ELT 415 (Tri-Del)]
ii) ACCE, Visakhapatnam Vs Hygrade Pellet Ltd., [2010 (249) ELT 266 (Tri-Bang)]
iii) CCE, Raipur Vs Seleno Steels Ltd., [2013 (287) ELT 93 (Tri-Del)]
iv) Tata Metaliks Ltd., Vs CCE, Pune [2010 (261) ELT 971 (Tri-Mum)]
v) CCE, Meerut-II Vs Maa Mangla Ispat Pvt Ltd., [2013 (293) ELT 380 (Tri-Del)]
vi) Nav Durga Fuels Pvt Ltd., Vs CCE, Raipur [2016 (340) ELT 526 (Tri-Del)]
vii) Godavari Power and Ispat Ltd., Vs CCE, Raipur [2017-TIOL-1098-CESTAT-Del]
14. In CCE & ST, Raipur Vs Aarti Sponge and Power Limited, the Tribunal upheld the order passed by the Commissioner (Appeals). The Commissioner (Appeals) had taken a view that emergence of iron ore fine cannot be held to be a manufacturing activity and the fact that such iron ore fines cleared without payment of duty, would not call upon the assessee to pay the 10% of the value of the same in terms of Rule 6, relying on several other decisions of the Tribunal.
15. In the case of High Grade Pellet Ltd., the Tribunal again upheld the order of the Commissioner (Appeals). On Appeal, the Commissioner had rejected the order of the Lower Authority for demanding 8% on the sale of iron ore chips in an almost similar process as in present case.
16. In the case of CCE, Raipur Vs Seleno Steels Ltd.,[2013 (287) ELT 93 (Tri-Del)], the Tribunal held that iron ore fines emerging during the process of iron ore are nothing but smaller piece of iron ore which are not usable for manufacture and therefore same cannot be hold to be as a result of manufacture. Relevant para is reproduced as under:
(8) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
"After going through the reasoning adopted by Commissioner (Appeals) and the grounds raised by the Revenue, I find that it is not disputed that the Iron Ore Fines emerge during the process of Iron Ore, as a waste material. They are nothing but smaller pieces of Iron Ore, which are not usable for further manufacture of Sponge Iron Ore. The same cannot be held to be a product having emerged as a result of manufacture. It is well settled law that the criteria of manufacture is required to be satisfied first for holding any product as excisable. If no manufacturing activity has taken place, mere mention of the goods in the tariff will not make the said goods as excisable goods. It is not the Revenue's case that by any artificial definition, the screening of Iron Ore has been held to be process of manufacture.''
17. In Tata Metaliks Ltd., in Para 10, relying on earlier judgments of Tribunal in the case of Vikram Ispat Ltd., Aparant Iron & Steel Pvt Ltd., and Narmada Gelatines Ltd., the matter was remanded with a direction that the decision of Tribunal in the case of Narmada Gelatines Ltd., which followed the decision of Bombay High Court, should be followed. In this case, Hon'ble High Court had held that when by-product or waste arising during the course of manufacture were cleared without payment of duty, erstwhile Central Excise Rules, Rule 63B of CCR 2004 were not attracted.
18. In Maa Mangla Ispat Pvt Ltd., in para 5, the Tribunal considered whether the provisions of Rule 6(2) and 6(3) of CCR were applicable when a manufacture manufactures two products, one excisable and other fully exempted using common input and/ or input service and came to the conclusion that the iron ore fines had emerged as an unavoidable and inevitable waste.
19. In the Godavari Power and Ispat Ltd., the appellant were engaged in manufacture of Sponge Iron, MS Ingots, Billets and H.B.Wires and were also generating electricity. Department's case was that iron ore fines and waste and slag cleared from factory along with main products are exempted goods and since input services on which credit was availed were used commonly in both excisable and exempted goods, 10% of the value of the exempted goods is to be paid along with interest and penalty. The Tribunal relying on their earlier judgments in the case of N.S. Ispat Pvt Ltd., Vs CCE, Raipur and Salasar Sponge and Power Ltd., Vs CCE, Raipur, where the issue was decided in the favour of the assessee by following the decision of Hon'ble Supreme Court in the case of Union of India Vs Hindustan Zinc Ltd., [2014 (303) ELT 321 (SC)], set aside the order.
20. Therefore, all the cited judgments are also supporting the contention of the appellant that if the goods, in this case iron ore fines, were not a result of a manufacturing activity, and therefore not a manufactured good, then in that case Rule 6 would not be applicable. These judgments also (9) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 support the agreement that the emergence of iron ore fines is inevitable in the process of manufacturing final product i.e. Sponge Iron, and therefore not a manufactured product. The Department has already considered in an indirect manner that this was a non-excisable goods, therefore it cannot be a manufactured goods. Therefore on this ground also, one has to arrive at the conclusion that iron ore fines, as emerging in the case of mere screening/sieving of iron ore lumps would not be a manufactured goods.
21. In the case of Union of India Vs DSCL Sugar Ltd., [2015 (322) ELT 769 (SC)] the Hon'ble Supreme Court considered the issue whether a product can be called a manufactured product or otherwise, keeping in view the provisions under the Section 2(d) as well as 2(f) of Central Excise Act, as it existed before 2008 as well as after 2008. The relevant paras are quoted below for ease of appreciation:
"6. The aforesaid judgment was pronounced by this Court related to the period before 2008. In the year 2008 there was an amendment in Section 2(d) as well as in Section 2(f) of the Act which defines 'excisable goods' and 'manufacture' respectively. Section 2(d) with the said amendment reads as under :
Section 2(d) - "excisable goods" means goods specified in [The First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986 ) as being subject to a duty of excise and includes salt;
Explanation - for the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable."
7. As per the aforesaid explanation, "goods" would now include any article, material or substance capable of being bought or sold for consideration and as such goods shall be deemed to be marketable. Thus, it introduce the deeming fiction by which certain kind of goods are treated as marketable and thus excisable.
8. However, before the aforesaid fiction is to be applied, it is necessary that the process should fall within the definition of "manufacture" as contained in Section 2(f) of the Act. The relevant portion of amended Section 2(f) reads as under :
Section 2(f) - "manufacture" includes any process -
(i) incidental or ancillary to be completion of a manufactured product;
(ii) which is specified in relation to any goods in the section or Chapter notes of [The First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or]
(iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;
(10) Appeal No. E/30237/2020,
E/30334/2021 & E/30214/2022
and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production of manufacture on his own account;"
9. The Revenue sought to cover the case under sub-clause (ii) as per which the process which is satisfied in relation to any goods in the Section or Chapter notices of the First Schedule to the Central Excise Tariff Act, 1985 would amount to 'manufacture'. Here again, fiction is created by including those goods as amounting to manufacture in respect of which process is specified in the Section or Chapter notices of the First Schedule.
10. In the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty.
11. Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application as rightly held by the High Court."
22. The appellants have also relied upon Balarampur Chini Mills Ltd., Vs UOI [2019 (368) ELT 276 (All)]. In this case, the issue was whether Rule 6 of CCR would be applicable to "Bagasse" emerging as a residue/waste of sugarcane in the course of manufacture of Sugar, is a manufactured product or a final product of the sugar cane or otherwise. Hon'ble High Court held it was neither a manufactured product nor a final product. The Hon'ble High Court also took into account the changes brought in Rule 6(1) by means of inserting explanation 1 and 2 with effect from 01.03.2015, which provided that exempted goods or final products shall include "non-excisable goods cleared for consideration" from the factory. It also considered that by way of Circular dated 25.04.2016 the CBIC interpreted the said amendment and held that Bagasse was an exempted products in terms of explanation1. The relevant paras of Hon'ble High Court in this case is quoted, as under:
"28. A perusal of the Explanation 1 to Rule 6 would indicate that it provides that the exempted goods and final product as defined in Clauses (d) & (h) of Rule 2 shall include non-excisable goods cleared for a consideration from the factory.
29. Explanation 1, talks about the inclusion of non-excisable goods cleared for consideration from the factory within the category of exempted goods or final products while the Circular dated 25-4-2016 proceeds on the basis that Bagasse is a non-excisable goods and is now to be treated like exempted goods for the purpose of a reversal of input and Input service.
30. As noted by the Hon'ble Supreme Court in the case of Union of India and Others v. M/s. DSCL Sugar Ltd. and Others (supra) specifically in the contest of Bagasse, Rule 6 applies only when there is a manufacture of final products or of exempted products, and if there is no manufacture, Rule 6 of the Cenvat Credit Rules, 2004, has no application.
31. This amendment may have the effect of treating Bagasse to be an exempted goods, but cannot result in Bagasse being manufactured goods, as the nature of Bagasse remains (11) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 that of an agricultural waste and residue and is not in effect a product. This aspect and character of Bagasse remains unaltered by insertion of Explanation 1."
23. In their conclusion, the Hon'ble Court held that in the absence of Bagasse being a manufactured final product, the application of Rule 6 of CCR was not attracted and that the ratio laid down in the DSCL case will still hold good. Ultimately CBIC Circular No. 1027/15/2016-CX dated 25.04.2016 to the extent it included Bagasse under the purview of reversal of input service credit in terms of Rule 6 of CCR 2004 was quashed by the Hon'ble High Court.
24. Learned Counsel by way of additional submission has also submitted that the reliance placed by Learned AR on CBIC Circular dated 25.04.2016 with regard to applicability of Rule 6 of CCR 2004 consequent to addition of explanation of 1 and 2 under Sub-rule 1 of Rule 6, doesn't survive in view of CBIC vide Circular No. 1084/05/2022-CX dated 07.07.2022 rescinding the referred circular dated 25.04.2016, having regard to several judgments. The Circular dated 25.04.2016 covered goods like Bagasse, Dross and Skimmings of non-ferrous metals or any such by-product or waste, which are non-excisable goods and cleared for a consideration from factory. The explanation required that these items were to be treated like exempted goods for the purpose of reversal of credit in terms of Rule 6. Later on, Hon'ble Supreme Court in the case of UOI Vs M/s Indian Sucrose Ltd., referring to its observation in the DSCL Sugar Ltd., held that Bagasse was non-excisable goods, to which the CCR have no application and thus Circular dated 25.04.2016 is unsustainable in law.
25. Therefore, the main issue that needs to be decided whether in the facts of the case whether the iron ore fines cleared by the appellants were manufactured goods or not and if they were not, whether they would still be subjected to Rule 6 of CCR, both before 01.04.2015 and after 01.04.2015 or otherwise. As has been held in all the cases cited above, the iron ore fines emerging in the course of sieving/screening of iron ore lumps, cannot be considered as manufactured goods or as manufactured final goods. Therefore, relying on case laws cited, supra, it would clearly not be covered by Rule 6 for period before 01.04.2015. Even for the period after 01.04.2015 were such "non-excisable goods" which are to be treated as "exempted goods", would still not be covered under Rule 6 for the purpose of reversal of credit or payment of an amount equivalent by relying on the (12) Appeal No. E/30237/2020, E/30334/2021 & E/30214/2022 ratio in the case of DSCL Sugar Ltd., and Balarampur Chini Mills Ltd. Essentially, unless the good is a manufactured goods, Rule 6 of CCR cannot be made applicable. Even when it is not manufactured and it is refunded to as non-excisable goods, which are required to be treated as the exempted goods, after 01.03.2015, it will not be covered in as much as the "exempted goods" themselves are also required to be manufactured goods first. Therefore Rule 6 would not be applicable in the given facts of the case.
26. Therefore in the facts of the case, it is clear that there is no manufacturing process involved and therefore the iron ore fines being cleared for a consideration, is not a manufactured goods. Further, respectfully following the ratio of Hon'ble Supreme Court and High Court, quoted supra, unless there is a manufactured product, Rule 6 cannot be invoked. Admittedly, amendment in CCR 2004 with effect from 01.04.2015 has brought "non-excisable goods" also under the ambit of "exempted goods" but the said exempted goods has also to emerge as a consequence of some manufacturing process. The Revenue has not been able to establish that the iron ore fines were "manufactured goods", which were exempted during the material time and infact they have relied mostly on the amendment made in the CCR 2004 with effect from 01.04.2015 for confirming the demand which also does not help for the reasons discussed in paras, supra. Since the matter is being decided on merits itself, other arguments on the grounds of limitation, penalties etc are not being considered. Further, with demand not sustaining on merits itself, demand for interest and penalties will also not survive.
27. In view of foregoings, I set aside the orders in appeal no. TTD-EXCUS- 000-APP-047-19-20 dated 23.10.2019, TTD-EXCUS-000-APP-030-2020-21 dated 28.10.2020 and TTD-EXCUS-000-APP-014-21-22dated 29.03.2022, and allow the Appeals No. E/30237/2020, E/30334/2021 and E/30214/2022, with consequential relief, if any.
(Order pronounced in the open court on 26.07.2023) (A.K. JYOTISHI) MEMBER (TECHNICAL) jaya