2026-VIL-1619-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Rule 6 of CENVAT Credit Rules, 2004 – Classification of manufactured intermediate products – Appellants, manufacturers of sugar confectionery, manufactured processed milk which was either captively consumed in the manufacture of sugar-boiled confectionery or supplied to job workers for further use; Processed milk was exempt from duty under Notification No.03/2006-CE and the Department alleged non-maintenance of separate accounts for common input service credit, proposing recovery of duty with penalty – Whether processed milk constitutes an exempted final product for the purposes of Rule 6 of the CENVAT Credit Rules, 2004 – HELD – Processed milk is an intermediate product forming an integral part of the continuous manufacture of sugar-boiled confectionery and not an independent final product, as it is neither manufactured nor cleared as a separate product. The tribunal relied on the principle established in Collector of Central Excise Vs Eastend Paper Industries Ltd. that where a process is so integrally connected with ultimate production that manufacture would be commercially inexpedient without it, articles required in such process fall within the expression 'in the manufacture of goods'. Further, as per Rallis India Ltd. and Union of India Vs Hindustan Zinc Ltd., a product emerging as a technological necessity in the course of manufacture of the principal product constitutes a by-product and Rule 6 obligation is not attracted merely because such by-product is exempted. Captive consumption or removal to job workers does not alter the character of processed milk as an intermediate product. Therefore, processed milk cannot be treated as an exempted final product for invoking Rule 6 – The impugned orders are set aside and the appeals are allowed
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