2012 (12) TMI 104 - AT - Central Excise

Excisable Goods - reversal of cenvat credit held that - Appellant is engaged in manufacture of sugar and molasses in which process the waste product i.e. Bagasse and press mud are generated, it cannot be said that the appellant possibly could have maintained separate account for inputs for production of excisable items sugar and molasses and exempted items i.e. Bagasse and press mud. - Bagasse generated in the course of crushing of sugarcane is not an excisable item notwithstanding the amendment of Section 2(d) of the Central Excise Act, 1944 vide Finance Act, 2008 which became operative w.e.f. 13.05.2008 - Bagasse and press mud being waste product those cannot be termed as excisable goods so as to attract the provision of Rule 6(2) and Rule 6(3) of the Cenvat Credit Rules, 2004 - impugned order is, therefore, not sustainable and is set aside - appeal as well as stay petition is allowed.

Summary

Issues:
1. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 regarding maintaining separate accounts for dutiable and exempted final products.
2. Applicability of the amendment in the Finance Act regarding the treatment of bagasse and press mud as exempted excisable goods.
3. Judicial precedents and their impact on the classification of bagasse and press mud as excisable goods.
4. Validity of the demand raised by the Jurisdictional Assistant Commissioner.

Analysis:

1. The case involved the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004, concerning the maintenance of separate accounts for inputs used in the manufacture of dutiable final products and exempted final products. The Jurisdictional Assistant Commissioner demanded payment from the appellant for not maintaining separate accounts, which was contested by the appellant.

2. The appellant argued that a previous Tribunal judgment favored their position, and the Supreme Court had dismissed the Department's appeal against it. The Department, however, relied on a Board Circular clarifying the treatment of bagasse as an exempted excisable good, subject to a charge of 5% of the sale value if Cenvat credit was taken on common inputs.

3. The Tribunal considered the nature of bagasse and press mud as waste products generated during the manufacturing process of sugar and molasses. Referring to a judgment of the Allahabad High Court, it was established that bagasse was not an excisable item despite the Finance Act amendment. The Tribunal concluded that bagasse and press mud should not be considered excisable goods, thus ruling out the applicability of Rule 6(3) of the Cenvat Credit Rules.

4. Consequently, the Tribunal set aside the impugned order of the Jurisdictional Assistant Commissioner, stating that the demand based on the failure to maintain separate accounts for bagasse was not sustainable. The appeal and stay petition were allowed in favor of the appellant, emphasizing that the amount under Rule 6(3) would not be recoverable for the clearance of bagasse and press mud.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant legal interpretations, and the final decision rendered by the Tribunal.