The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi disallowed demand of CENVAT Credit on contents of coal fines and held that contents of coal fines are not inputs under Rule 3(5) of Cenvat Credit Rules, 2004.
The appellant, M/s Satya Power and Ispat Ltd is the manufacturer of sponge iron and for this purpose they require raw material like iron ore, coal and dolomite. According to the Department on this Iron ore fines, although the appellant have availed input Cenvat credit at the time of receipt in the factory but at the time of removal proportionate Cenvat credit amounting Rs.6,39,681/- has not been reversed under provisions of Rule 3(5) of Cenvat Credit Rules, 2004 and also that the appellant had received short quantity of coal by 266.420 MT in their factory premises as compared to the quantity shown in the bill and wrongly availed Cenvat credit of Rs. 25,416/- on that short quantity also which they neither received nor used for manufacture of the finished goods. Accordingly, a show cause notice was issued to the appellant.
The said show cause notice was adjudicated by the Adjudicating Authority by which the said authority confirmed the recovery of credit availed by the appellants along with interest and penalty. Aggrieved, the appellant filed appeal before the Commissioner (Appeals) but the same was rejected by way of impugned order. The issue is whether the appellant is liable to pay central excise duty on removal of iron ore fines or iron ore concentrates.
A Single Bench consisting of Ajay Sharma, Judicial Member held that “It can safely be concluded that the fines etc are by-product or incidental product which cannot be said to be inputs as such which by any stretch of imagination cannot be said to attract the provisions of Rule 3(5).”
“According to learned counsel the said short receipt is sometimes due to transit loss/theft and as per industrial practice 4% is permissible. Since this short receipt cannot be treated as clandestine removal therefore there is no reason not to accept the submission/explanation given by the learned counsel. Therefore, on this issue also demand cannot be sustained.”
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