Order Date: 13 September 2022

Facts-

• The Appellant, 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 department on this Iron ore fines/iron concentrates 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  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 on that short quantity also which they neither received nor used for manufacture of the finished goods.
• Accordingly, a show cause notice dated 11.8.2016 was issued demanding interest and penalty.
• The said show cause notice was further adjudicated by which the authorities confirmed the recovery of credit availed by the appellants along with interest and penalty. 
• Being aggrieved, the appellant filed this appeal.

Issue-

• Whether the Appeal filed by the appellant is sustainable?

Order-

• The Tribunal observed that 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 CCE, RAIPUR VERSUS M/S. NUTAN ISPAT & POWER LTD. 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 favor 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, 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 - This issue is decided in favor of the Appellant.
• Further, 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. According to learned counsel the said short receipt is sometimes due to transit loss/theft and as per industrial practice ± 4% is permissible. Therefore, on this issue also demand cannot be sustained.
• Further, the wrongly availed Cenvat Credit of Rs.9,768/- on input service paid on GTA service against sponge iron received back from the customers. This issue is also covered in favor of the assessee in view of the decision of a coordinate Bench of the Tribunal in the matter of CHITRAKOOT STEEL & POWER PVT. LTD. VERSUS COMMR. OF C. EX., CHENNAI in which it has been held that no demand can be made for input services if the finished goods are received back.
• Therefore, the Appeal filed by the appellant is allowed.