Boiler Ash and Sludge which emerged as Byproducts falls outside purview of Rule 6(3) of CENVAT Credit Rules: CESTAT Quashes Penalty Imposed on Excess Recovery Demand [Read Order]

The Mumbai bench of the Customs, Excise and Services Tax Appellate Tribunal quashed the penalty imposed on excess recovery demand on boiler ash and sludge which was categorized as products or waste which does not fall within the purview of Rule 6(3) of CENVAT Credit Rules, 2004. 

Bhaurao Chavan SSK Ltd, the appellant assessee appealed against the order passed by the Commissioner (Appeals) for rejecting the appeal filed by the assessee and upholding the recovery of the amount equal to 6% of the sale value of Bagasse, Press mud, boiler ash and Sludge under Rule 6(3) of the CENVAT Credit Rules, 2004 along with interest and penalty. 

J.N. Somaiya, the counsel for the assessee contended that the press mud, bagasse, and boiler ash are capable of being sold and appeared to be excisable goods and the tariff rate of duty for press mud was NIL and therefore it was exempted from the whole of the Central Excise duty. 

It was further submitted that the provision of Rule 6(3) of the CENVAT Credit Rules is applicable only when a manufacturer was engaged in the manufacture of any final product which was chargeable to duty as well as any other final product which was exempted from whole of duty or chargeable Nil rate of duty using CENVAT inputs. 

Amrendra Kumar, the counsel for the respondent contended that the assessee had availed CENVAT credit on various input & input services which were utilized for the manufacture of dutiable final products viz. sugar and molasses as well as an exempted product like bagasse, press mud, boiler ash, and sludge.

The bench observed that the press mud, bagasse, boiler ash, and sludge which emerged as waste or byproduct, fall outside the purview of Rule 6(3) of the CENVAT Credit Rules and the penalty imposed was not as per the law, and was liable to be deleted. 

A single-member bench comprising Ajay Sharma (Judicial) quashed the penalty imposed by the Commissioner (Appeals) while allowing the appeal filed by the assessee. 

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