TMI Blog2015 (10) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... of exempted goods/ exempted services and those used in or in relation to the manufacture of dutiable final products or providing exempted output service and take credit only on that quantity of inputs/input services which is intended for use in the manufacture of dutiable final product or providing output service on which no service tax is payable. - in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per: Rakesh Kumar: The appellant are manufacturer of M.s.Ingots from sponge iron. In the course of manufacture of M.S.Ingots, slag dust is generated as by-products which is fully exempt from duty under Notification No.4/06-CE dt.1.3.06 and accordingly slag dust was cleared at nil rate of duty. The period of dispute in this case is from 2009-10 to 2011-12. The appellant were availing cenvat credit of duty paid on sponge iron and other inputs/input service. The department was of the view that since the appellant were using common inputs in relation to manufacture of dutiable goods (MS ingots) and exempted goods (Slag dust), and they are not maintaining separate accounts for inputs/input services used in the manufacture dutiable g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount and, therefore, the provisions of Rule 6(3) would not be applicable, that he relies upon the judgement of Hon'ble Bombay High Court in the case of Rallis India Ltd. vs. Union of India-2009 (233) ELT 301 (Bom) wherein in the background of similar facts involving an identical issue, it has been held that provision of rule 57CC would not be applicable in respect of mother liquor arising in the manufacture of gelatine, that the same view has been taken by Hon'ble Gujarat High Court in the case of CCE vs. Nirma Ltd.-2012 (281) ELT 654 (Guj.) wherein the High Court has held that when the entire quantity of input was used in the manufacture of a dutiable final product and an exempted by-product emerges during the process of manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) (i) of Cenvat Credit Rules have been correctly invoked. He, therefore, pleaded that there is no infirmity in the impugned order. 4. We have considered the submissions made from both sides and perused the records. 5. The appellant are manufacturer of M.S.Ingots from sponge iron. In the course of manufacture of M.S.Ingots, slag dust arises which is waste and the same is fully exempt from duty under Notification No.4/06-CE dt. 1.3.06. The department's case against the appellant is that since the cenvat credit availed inputs have been used for manufacture of dutiable and exempted final products and since the appellant have not complied with the provisions of sub-rule (2) of Rule 6, the provisions of sub-rule (3) of Rule 6 of Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available is reversing proportionate cenvat credit as per the formula prescribed under Rule 6(3A). However, from reading of sub-rule (2) and sub-rule (3) of Rule Rule 6, it is clear that sub-rule (3) is applicable only when the provisions of sub-rule (2) are not complied with by a manufacturer. In this case, in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of MS ingots, this is impossible as slag emerges ..... X X X X Extracts X X X X X X X X Extracts X X X X
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