2012 (7) TMI 905 - AT - Central Excise

Waiver of pre-deposit, interest, penalty - The case of the Revenue is that bagasse and press mud are excisable goods, and the manufacturer of sugar and molasses are not maintaining separate records hence, as per the provisions of Rule 6 of the CENVAT Credit Rules, 2004, the manufacturer has to pay 5%-10% of the price of the exempted goods i.e. bagasse and press mud - Held that - It may be noted that crushing of sugarcane is necessary to extract can sugar juice which in turn is processed for production of sugar and molasses - Thus, in our considered view, the amendment in Finance Act, cited by Shri Nagesh Pathak, AR and the Board Circular would not make any difference in the facts and, circumstances of the case. Moreover, neither the show-cause notice nor the impugned order in appeal mentions as to which common CENVAT credit availed inputs have been used in manufacture of sugar and molasses (dutiable final products) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any input-chemicals etc. having been used at that stage. The expression exempted goods has been defined for the purpose of CENVAT Credit Rules in Rule 2(d) to mean excisable goods which are exempt from the whole of duty of excise leviable thereon and includes goods which are chargeable to nil rate of duty. As per this definition, the impugned goods namely press mud and sludge would be covered under the definition exempted goods , though the same cannot be treated as excisable goods for the reasons stated in paragraph 5 above. The question raised in this case is whether in terms of Rule 6(3)(i), an amount equal to 10% / 5% would be payable on such goods. Considering the precedent decisions cited above, Board s Manual provisions as well as Board s circular cited above, I am of the view that the demand of 10% / 5% on press mud and sludge, which are in the nature of by-product and waste and also non-excisable cannot be sustained - Appeal allowed.

Summary

Issues:
1. Whether bagasse and press mud can be treated as manufactured goods.
2. Whether the demands made by the Revenue on the price of bagasse and press mud are sustainable.
3. Whether the provisions of Rule 6 of CENVAT Credit Rules, 2004 are applicable in this case.

Analysis:

Issue 1:
The appellants argued that bagasse and press mud should be considered as manufactured goods, citing relevant legal precedents. They referred to the decision of the Hon'ble Supreme Court and other cases to support their claim. The Revenue contended that bagasse and press mud are excisable goods and manufactured products, classifiable under specific chapters of the Tariff Act. They relied on the interpretation of the term "produce or manufacture" and argued that bagasse and press mud are produced during the manufacture of sugar and molasses, hence subject to duty.

Issue 2:
The Revenue confirmed the demands by invoking Rule 6 of the CENVAT Credit Rules, 2004, which requires maintaining separate accounts for exempted goods. The Revenue argued that since bagasse and press mud are excisable goods and the appellants did not maintain separate records, they are liable to pay a percentage of the price of the exempted goods. However, the appellants contested this, referring to legal judgments that clarified the nature of bagasse and press mud as waste products rather than manufactured goods subject to duty.

Issue 3:
The Tribunal analyzed the applicability of Rule 6 in demanding duty on bagasse and press mud. They considered the definition of exempted goods under the CENVAT Credit Rules and the treatment of waste and by-products in previous legal decisions. The Tribunal concluded that the demands of 10% / 5% on press mud and sludge, being waste and non-excisable, were not sustainable under Rule 6. They also referenced Board's Manual provisions and circulars to support their decision.

In conclusion, the Tribunal set aside the impugned order, allowing the appeals and waiving the pre-deposit of dues based on the settled legal principles and interpretations of relevant laws and precedents.