TMI Blog2016 (1) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... ingots and take credit only in respect of inputs and inputs services used in the manufacture of MS ingots, this is impossible a slag emerges as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services consciously manufactures final products one dutiable and other exempt in two separate processes. But complying with Rule 6 (2) is impossible where while manufacturing a product A, a product B emerges as an unavoidable by-product or as waste. Lex Non Cogit ad Impossibila is a well settled legal principle applicable in respect of taxation matters also. When it is impossible to comply with the provisions of sub-rule (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 (M.S. Ingots) and exempted goods (Slag dust) and they are not maintaining separate accounts for inputs/input services used in the manufacture of dutiable goods and exempted final products, in respect of clearance of slag dust an amount of 5% of the sale value of the slag dust cleared at nil rate of duty would be payable under Rule 6(3) of the Cenvat Credit Rules, 2004. It is on this basis that the Dy. Commissioner vide order-in-original dated 31.01.2014, confirmed the demand of ₹ 3,77,770/- against the appellant under Rule 6(3)(i) of Cenvat Credit Rules, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (Gujarat) 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 manufacture, there was no question of maintaining separate accounts or paying a percentage of total price of the exempted by-product, that the apex Court in the case of Hindustan Zinc Ltd. Vs. Union of India - 2014 (303) ELT 321 (SC) has held that when in the course of manufacture zinc or copper during calcinations of ore concentrates, sulphuric acid emerged as inevitable technical necessity, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m duty under notification no.4/06-CE dated 1.3.2006. 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 Credit Rules, 2004 would be applicable and invoking clause (i) of-Rule 6(3), an amount of 5% of the total sale value of the slag dust cleared at nil rate of duty has been demanded. 6. In terms of sub-rule (2) of Rule 6, where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufacturers such final products or provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent 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 product - MS ingots and take credit only in respect of inputs and inputs services used in the manufacture of MS ingots, this is impossible a slag emerges as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services consciously manufactures final products one dutiable and other exempt in two separate processes. But complying with Rule 6 (2) is impossible where while manufacturing a product A, a product B emerges as an unavoidabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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