2011 (5) TMI 733 - AT - Central Excise

Cenvat credit - appellant not maintained separate account and inventory of the inputs meant for dutiable final products and exempted final product Held that - requirement of Rule 6(2) can be fulfilled only in respect of the final products which a manufacturer wants to manufacture and this requirement cannot fulfilled in respect of inevitable waste or by product in such a situation the provisions of Rule 6(2) and 6(3) would not apply Rallis India Ltd. (2008 - TMI - 32215 - HIGH COURT BOMBAY) requirement of pre-deposit of the amount confirmed under Rule 6(3) and interest is waived stay application is allowed

Summary

Issues:
1. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 regarding payment obligation on press mud.
2. Applicability of Rule 6(2) in cases involving waste or by-products.
3. Prima facie view on waiver of pre-deposit for appeal hearing.

Analysis:
1. The appellant, a sugar mill, availed Cenvat credit on inputs and capital goods for their final products. The dispute arose concerning press mud, a waste product from cane juice cleaning, and the department demanded payment under Rule 6(3) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the demand, leading to the present appeal with a stay application.

2. The appellant argued that press mud, like bagasse, is waste and not excisable, citing a Tribunal judgment upheld by the Supreme Court. They contended that the demand and interest were unjustified. The Departmental Representative countered, citing an amended definition of goods under the Central Excise Act, stating press mud was marketable and hence excisable. The Tribunal analyzed the nature of press mud, a by-product, and the applicability of Rule 6(2) and 6(3) in such cases.

3. The Tribunal noted that Rule 6(2) requires maintaining separate accounts for dutiable and exempted final products, or payment as per Rule 6(3). However, in cases of inevitable waste or by-products, compliance with Rule 6(2) may not be feasible. Citing precedents, the Tribunal held that Rule 6(2) and 6(3) do not apply to waste products. Consequently, the Tribunal waived the pre-deposit amount and interest for the appeal hearing, granting a stay on recovery.

This judgment clarifies the application of Cenvat Credit Rules to waste products like press mud, emphasizing the distinction between dutiable final products and by-products exempt from payment obligations.