2013 (3) TMI 366 - HC - Central Excise

Liablity to pay 8% on the price of the final product viz., Bio-compost fertiliser, which is a mixture of bye products viz., Press mud and Spent wash, under Rule 57C r.e.r. 57CC of the Central Excise Rules - assessee is a manufacturer of Sugar, Molasses and Denatured Ethyl Alcohol - as per dept. assessee manufactured and cleared bio-compost fertiliser during the period from 21.8.1996 to 28.3.2000 without following the Central Excise Procedures - Whether the Tribunal is correct in holding that the provisions of erstwhile Rule 57CC Central Excise Rules, 1944 is not applicable in this case? - Held that - Finding force in the submission made by the assessee as the cenvated inputs were brought into the factory by the assessee for using it in the manufacture of their final products viz., sugar, molasses, Denatured Ethyl Alcohol. Once they use those cenvated inputs at the initial stage and obtain certain final products as well as wastes such as press mud and spent wash, there was no further application or usage of those inputs either in or in relation to the manufacture of final products once again. The same inputs cannot be considered to have been utilised or used even indirectly in the manufacture of disputed item viz., bio-compost fertiliser, especially under the factual circumstances that the same came to be manufactured only by adding those two waste materials together. May be those two waste materials contained the trace of certain chemicals with the characteristics of original inputs. That itself cannot be taken to mean that the product emerged out of those wastes was also manufactured by using those cenvated credit inputs. As rightly contended by the assessee, the characteristic of sugar cane containing various chemicals cannot be stopped or prevented by the manufacturer to pass on even to the wastes, as it is undoubtedly a natural flow of in born character from one stage to another. Only when there is a further addition of inputs or chemicals with similar characteristics externally by the manufacturer, the Revenue can invoke Rule 57CC. When spent wash and press mud had emerged as inevitable wastes during the process of manufacturing of final products viz., sugar and Denatured Ethyl Alcohol and the said wastes are combined and treated together to form another final product viz., bio-compost, the said final product cannot be brought under Rule 57CC. See Rallis India Ltd Vs., Union of India 2008 (12) TMI 46 - HIGH COURT BOMBAY the fact that the waste mother liquor arising in the manufacture of gelatin was further processed to manufacture exempted phosphoryl A and B would not attract Rule 57CC, because, if Rule 57CC was not applicable at the time of clearance of the waste mother liquor arising in the manufacture of dutiable gelatin, then the said rule cannot be applied merely because mother liquor was further processed to manufacture exempted final product, namely, phosphoryl A and B . Also see Commissioner of Central Excise Vs. Sterling Gelatin (2010 (9) TMI 857 - GUJARAT HIGH COURT) who relied on the decision of Commissioner Vs. National Organic Chemical Industries Limited (2008 (11) TMI 6 - SUPREME COURT) As the very same Tribunal considered the same issue and given a finding in favour of the assessee in the case of Commissioner of Central Excise, Tirunelveli Vs. Dharani Sugars & Chemicals Ltd. 2008 (8) TMI 618 - CESTAT, CHENNAI (Tri Chennai) we wonder as to how the Revenue is justified in contesting the very same issue in this appeal in respect of another assessee. If an issue is decided in favour of any party and had attained finality and accepted by the parties, the affected party in that case is certainly precluded from questioning its correctness in an another case - in favour of the assessee and against the Revenue.

Issues Involved:
1. Liability of the first respondent assessee to pay 8% on the price of Bio-compost fertiliser under Rule 57C read with Rule 57CC of the Central Excise Rules, 1944.
2. Applicability of Rule 57CC to the manufacture of Bio-compost fertiliser.
3. Consistency in the Revenue's stance on similar issues across different cases.

Detailed Analysis:

1. Liability of the First Respondent Assessee to Pay 8% on the Price of Bio-compost Fertiliser:
The core issue is whether the first respondent assessee is liable to pay 8% on the price of Bio-compost fertiliser under Rule 57C read with Rule 57CC of the Central Excise Rules, 1944. The Revenue contends that the first respondent used cenvated inputs in the manufacture of Bio-compost fertiliser, which is exempted from duty. The Revenue's argument is based on the lab report indicating that the spent wash contained chemicals like chlorides, sulphides, di-phosphates, potassium, sodium, and nitrogen, which were present in the final product, Bio-compost fertiliser.

The first respondent, however, argues that the cenvated inputs were used only in the manufacture of sugar, molasses, and Denatured Ethyl Alcohol, and not in the manufacture of Bio-compost fertiliser. They assert that Bio-compost fertiliser is produced by mixing two waste products, press mud and spent wash, which are by-products of sugar and Denatured Ethyl Alcohol manufacturing processes.

2. Applicability of Rule 57CC to the Manufacture of Bio-compost Fertiliser:
Rule 57CC requires a manufacturer to pay 8% on the price of exempted final products if cenvated inputs are used in their manufacture. The court analyzed whether the cenvated inputs were used in the manufacture of Bio-compost fertiliser. It was found that the cenvated inputs were used only at the initial stage of manufacturing sugar, molasses, and Denatured Ethyl Alcohol. The emergence of press mud and spent wash as waste products did not involve further use of cenvated inputs.

The court concluded that the characteristics of the waste products (press mud and spent wash) were due to the natural properties of sugar cane and not due to the cenvated inputs used in the initial manufacturing process. Therefore, the final product, Bio-compost fertiliser, did not involve the use of cenvated inputs, and Rule 57CC was not applicable.

3. Consistency in the Revenue's Stance on Similar Issues Across Different Cases:
The court noted that the Revenue had taken inconsistent stances in similar cases. In the case of Commissioner of Central Excise, Tirunelveli Vs. Dharani Sugars & Chemicals Ltd., the Tribunal had ruled in favor of the assessee on a similar issue, and the Revenue had accepted that decision without further appeal. The court emphasized the need for consistency in the Revenue's approach to similar issues to avoid confusion and ensure fairness.

The court referenced several decisions, including those of the Apex Court, which highlighted the importance of the Revenue maintaining a consistent stance in similar cases. The court concluded that the Revenue's inconsistent approach in the present case was unjustified.

Conclusion:
The court dismissed the Revenue's appeal and ruled in favor of the assessee, holding that the demand for 8% payment on the price of Bio-compost fertiliser under Rule 57CC was unsustainable. The court emphasized that the cenvated inputs were used only in the manufacture of sugar, molasses, and Denatured Ethyl Alcohol, and not in the manufacture of Bio-compost fertiliser. The court also highlighted the need for consistency in the Revenue's stance on similar issues across different cases. Consequently, all related appeals were also dismissed.

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