2013 (8) TMI 464 - AT - Central Excise

Demand under Rule 6(3) - Cenvat credit availed - Held that - bagasse emerges in course of crushing of the sugarcane - 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 product) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any inputs-chemicals etc. having been used at that stage - Following decision of BAJAJ HINDUSTAN LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I 2013 (4) TMI 180 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
Demand under Rule 6(3) of the Cenvat Credit Rules in respect of exempted bagasse cleared without payment of duty.

Analysis:
The appeal was filed by M/s Kumbhi Chini Mills against the Order-in-Appeal No. 18/CE/LKO/2011 dated 22.2.2011. The case involved the manufacturing of sugar and molasses where bagasse, an exempted by-product, is also produced. The appellant was availing Cenvat credit facility on inputs and capital goods. A Show Cause Notice was issued demanding an amount equal to 10% of the total price of the exempted goods cleared during a specific period. The original authority confirmed the notice, and the appellant's appeal before the Commissioner of Central Excise (Appeals) was rejected, leading to the challenge in the present appeal.

The main issue in the appeal was regarding the demand under Rule 6(3) of the Cenvat Credit Rules concerning bagasse, which was exempted and cleared without payment of duty. The Tribunal referred to a previous case involving Bajaj Hindustan Ltd. vs. CCE and highlighted that demanding under Rule 6(3) for bagasse clearances is not sustainable. The Tribunal's decision emphasized that bagasse emerges as a waste product during the crushing of sugarcane, a necessary process for extracting cane sugar juice used in sugar and molasses production. It was noted that maintaining separate accounts for inputs related to sugar/molasses and bagasse was not feasible due to the nature of bagasse production. The Tribunal found no mention in the show cause notice or the impugned order about the specific inputs used in the production of dutiable final products versus exempted final products. As bagasse emerges at the sugarcane crushing stage, it was deemed improbable that certain inputs like chemicals were used at that point. Consequently, the Tribunal set aside the impugned order, allowing the appeal and stay applications based on the merits presented.

In conclusion, the Tribunal, per Sahab Singh, set aside the Order-in-Appeal and allowed the appeal filed by the appellant based on the precedent established in the Bajaj Hindustan Ltd. case. The decision highlighted the impracticality of maintaining separate accounts for inputs in the production of sugar/molasses and exempted bagasse, ultimately leading to the ruling in favor of the appellant.