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2023 (12) TMI 522 - CESTAT NEW DELHIReversal of CENVAT Credit - clay (by-product) is exempted from excise duty and arises during the course of excavation and production of the dutiable final product lignite - manufacture of clay as final product, taking place or not - liability to pay an amount in terms of rule 6(3)(b) of the CENVAT Rules @ of 6% of the value of clay. HELD THAT:- The issue involved in this appeal stands decided in favour of the appellant by the Tribunal in GUJARAT MINERAL DEVELOPMENT CORPORATION LTD VERSUS C.C.E. & S.T. -VADODARA-II [2021 (10) TMI 307 - CESTAT AHMEDABAD]. The issue was whether Gujarat Mineral Development Corporation was required to pay an amount under rule 6 of the CENVAT Rules in respect of exempted product namely Silica Sand and Ball Clay when the input service was used for mining of lignite and it was held that it is clear that any input/input services contained in any by-product/waste/refuse, Cenvat Credit cannot be varied or denied. With this logic demand under Rule 6 in respect of by-product is not applicable. In the present case also, the appellant has only been authorised to excavate lignite which is a raw material used by the appellant in the generation of power. The appellant had engaged KSK to mine lignite and the consideration that was to be paid by the appellant to KSK was on the basis of per metric ton of lignite supplied at delivery point. For mining of lignite, it was imperative for KSK to remove the overburden, including clay. Clay which arises as a technical necessity in the course of excavation of lignite is, therefore, not a manufactured commodity. It is a by-product arising in the course of manufacture and is waste so far as the appellant is concerned. In view of the aforesaid decision of the Tribunal in Gujarat Mineral Development Corporation, it cannot be said that the appellant had manufactured two products namely lignite and clay out of which one is exempted or chargeable to nil rate of duty and the other is dutiable as a result of which the appellant had to maintain separate records for utilisation of input service in the manufacture of these products, thereby attracting rule 6(3) of the CENVAT Rules - the order dated 26.02.2019 passed by the Commissioner, therefore, cannot be sustained and is set aside - appeal allowed.
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