ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against the Order-in-Appeal No. 190/2005 CE dated 26.09.2005, passed by the Commissioner of Central Excise, Mangalore.
2. The appellants manufacture steel in their integrated steel factory. Several by-products emerged in the course of manufacture of steel. They are granulated slag, non-granulated slag and corex gas. The present appeal is in respect of the clearance of non-granulated slag. According to the Revenue, in terms of Rule 6(3) of CENVAT Credit Rules 2002, the appellant is liable to pay 8% of the sale value of the non-granulated slag. The lower authority demanded Rs. 8,80,322/- under the said rules. He imposed equal penalty and demanded interes in terms of Rule 12 of the CENVAT Credit Rules. The order of the lower authority has been upheld by the Commissioner (Appeals). The appellants strongly challenge the impugned order.
3. S/Shri K.S. Ravi Shankar and N. Anand, the learned Advocates appeared for the appellants and Shri R.K. Singla, the learned Jt. CDR appeared for the Revenue.
4. Shri Ravi Shankar, the learned Advocate urged the following points:
(i) Non-granulated slag is only a by-product and waste. It cannot be considered as an excisable goods. Hence, the provision of Rule 6 of Cenvat Credit Rules is not applicable.
(ii) The present appeal pertains to the period from June 2003 to February 2004. For the subsequent period, namely, from March 2004 to September 2004 it has been held by the Assistant Commissioner that the non-granulated slag is waste. There is nothing arising during the course of manufacture of final products and hence, Rule 6 would not be attracted. (Order-in-Original No. 26/2005 dated 16.6.2005)
(iii) Prior to the above proceedings, the Assistant Commissioner decided that even granulated slag is not excisable and sanctioned refund in his order dated 16.9.2004 to the tune of Rs. 8,61,325/-.
(iv) The following judicial decisions have clearly held that slag whether granulated or non-granulated is not an excisable goods:
(a) Tata Metaliks Ltd. v. CCE affirmed by the Apex Court by dismissing the Civil Appeal filed by the Commissioner
(b) Hindustan Zinc Ltd. v. CCE 2004 (173) ELT 131 (T- Bang.)
(c) Jain Carbide & Chemicals Ltd. v. CCE
(d) Mukund Ltd. v. CCE 2002 (148) ELT 677 (T-Mum)
(e) TISCO Ltd. v. CCE
(v) Merely because an item is mentioned in the CET is not sufficient to hold that the same is excisable.
(vi) When non-granulated slag is not excisable, the question of invoking Rule 6 of the Cenvat Credit Rules does not arise.
(vii) In cases where the department has taken a view favourable to the assessee, the Revenue has not appealed against the order. Hence they cannot take a contrary view for an earlier period.
(viii) Even if it is assumed that non-granulated slag is excisable it is submitted that it is not a final product. In terms of Rule 57D, the Modvat credit is not tenable on account of the fact that the input is contained any waste or by-product. Since the CENVAT Credit and the Modvat Creidt are similar, the same would be applicable in the present case also.
(ix) The CBEC in its Circular dated 3.4.2000 has clarified that the Cenvat credit would be admissible on the part of input contained in any waste, refuse or by-product. In the light of the above clarification, the demand under Rule 6(3)(b) of the Cenvat Credit Rules is contrary to law.
5. The learned Jt. CDR re-iterated the impugned Order-in-Appeal.
6. We have gone through the records of the case carefully. Non-granulated slag which arise in the course of manufacture of steel is not a final product. At the most, non-granulated slag can be considered as by-product. In that case, Rule 6(3) would not be applicable. We are reproducing Para 5 of Board’s clarification in the matter, vide Circular dated 3.4.2000 below:
5. Some doubts have been raised whether CENVAT credit would be admissible on the part of input that is contained in any waste, refuse or byproduct In this context it is clarified that CENVAT credit shall be admissible in respect of the amount of inputs contained in any of the aforesaid waste, refuse or by-product. Similarly, CENVAT should not be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products and whether directly or indirectly.
Moreover, the Revenue itself in subsequent period has held that non-granulated slag is not excisable. In these circumstances, the appellants have a strong case. The impugned Order-in-Appeal has no merit. Hence we allow the appeal with consequential relief.
(Operative portion of the order has been pronounced in the open court on completion of hearing)