Excise duty on iron ore fines generated during the process of screening of coal

Satya Power & Ispat Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Delhi)

The issue is whether the appellant is liable to pay central excise duty on removal of iron ore fines/iron ore concentrates? Learned counsel for the Appellant submits that in the de-novo proceedings, the lower authority without appreciating the submissions made in appellant’s reply, confirmed the recovery alongwith interest and penalty which was upheld by the learned commissioner that too without appreciating the contentions raised by the appellant. He further submits the issued involved herein in squarely covered by the decision of this Tribunal in the matter of CCE, Raipur vs. Nutun Ispat & Power Ltd.; 2016(341) ELT 360 (Tri-Del) and also by the decision of co-ordinate Bench of the Tribunal in the matter of CCE & ST, Jamshedpur vs. Kohinoor Steel Pvt. Ltd.; Final order No.FO/A/76175 of 2018 dated 5.4.2018. According to learned counsel the department is demanding duty on iron ore fines generated during the process of screening of coal by invoking Rule 3(5) ibid whereas the appellants have not purchased iron ore fines and no Cenvat credit has been taken by them on iron ore fines. So far as 266.420 MT less receipt of coal is concerned, learned counsel submits that few percentage of short receipt is normal as per industry practice.

So far as the demand under Rule 3(5) ibid on clearance of Iron Ore Fines/Iron Ore Concentrate is concerned, the issue is no more res integra in view of the decision of this Tribunal in the matter of Nutun Ispat & Power Ltd.(supra) in which also the issue was whether the Iron ore fines, which are not used by the assessee in further manufacture and cleared, will attract the provisions of Rule 3(5) ibid and the Tribunal while giving the finding in favour of the assessee therein, rejected the appeal of the revenue.

In the instant case while explaining the procedure, learned counsel submits that during the manufacturing process of the sponge iron, iron ore fines are generated at the time of screening/grading and crushing, which is nothing but waste and in order to keep the production at a constant pace the aforesaid process of screening is essential and indispensable and iron ore and coal fines contents have to be removed else it would stick on the inner wall of the kiln and reduce the space inside the kiln, called accretion. Therefore 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) ibid. In view of the aforesaid discussions, this issue is decided in favour of the Appellant.

So far as short receipt of 268.420 MT of coal is concerned on which department is demanding duty, in my view that is also not sustainable. There is no allegation or any evidence of clandestine removal of the said quantity of coal. Mere shortage cannot ipso facto lead to the allegation of clandestine removal and for this I placed reliance on the decision of the Hon’ble High Court of Punjab & Haryana at Chandigarh in the matter of CCE & ST, Ludhiana vs. Anand Founders & Engineers; 2016(331) ELE 340 (P&H). 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. Regarding the issue of wrongly availed Cenvat credit of Rs.9,768/- on input service paid on GTA service against sponge iron received back from the customers is concerned, this issue is also covered in favour of the assessee in view of the decision of a co­ordinate Bench of the Tribunal in the matter of Chitrakoot Steel & Power Pvt. Ltd. Vs. CCE, Chennai; 2008(10)STR 118 (Tri.-Chennai) in which it has been held that no demand can be made for input services if the finished goods are received back. As in view of facts of this case, all the issues involved herein are decided in favour of the appellants therefore I am not going into the issue of extended period of limitation.

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