2013 (1) TMI 613 - AT - Central Excise

Common inputs - Baggase is waste or by product - Rule 6 of the Cenvat Credit Rules, 2004 - Common inputs on which Cenvat credit has been availed by the appellant have been used for manufacture of various products and also the resultant baggase - Rule 6(3)(i) & 6(3)(ii) of the Cenvat Credit Rules, 2004 Held that - Following the decision in case of Balrampur Chinni Mills (2013 (1) TMI 525 - ALLAHABAD HIGH COURT) that bagasse generated during the process of manufacture of sugar, is not a manufactured product. Order set aside. In favour of assessee

Summary

Issues:
Manufacture of bagasse without payment of duty and declaration in ER-1 Returns, applicability of Rule 6 of Cenvat Credit Rules, 2004, confirmation of demand, imposition of interest and penalty, appeal rejection by Commissioner (Appeals).

Analysis:
The appellants were involved in the manufacture of various products including V.P. Sugar, molasses, rectified spirit, and de-natured spirit. Bagasse, a by-product, was produced during this process, attracting nil rate of duty. The appellant cleared bagasse without paying duty and omitted the sales declaration in ER-1 Returns. A show cause notice was issued, leading to confirmation of a demand under Rule 14 of Cenvat Credit Rules, 2004, with interest and penalty. The Commissioner (Appeals) rejected the appeal against this order.

The appellant challenged the order, arguing that the authorities misinterpreted facts and wrongly applied Rule 6 of Cenvat Credit Rules, 2004. They contended that bagasse is waste from the initial sugarcane crushing stage, not attracting excise duty. The appellant did not avail Cenvat credit on sugarcane freight. The respondent argued that common inputs were used for various products, including bagasse, and the appellant's failure to maintain separate accounts justified the demand, interest, and penalty.

The Tribunal examined Rule 6(1), Rule 6(2), and Rule 6(3)(i) and (ii) of Cenvat Credit Rules, 2004. The department needed to prove the appellant availed Cenvat credit for inputs used in bagasse production. The show cause notice lacked specifics on cenvatable inputs. The order-in-original lacked evidence supporting the conclusion that cenvatable inputs were used for bagasse. The Tribunal cited a High Court order stating bagasse from sugar manufacture is not a manufactured product, leading to the rejection of the duty demand, interest, and penalty. The impugned orders were set aside.

In conclusion, the appeal was accepted, and the impugned orders were overturned. The Tribunal found the authorities erred in applying Rule 6 of Cenvat Credit Rules, 2004, due to the lack of evidence supporting the use of cenvatable inputs in bagasse production.