2013 (9) TMI 725 - HC - Central Excise

CENVAT Credit production of bagasse during mcrushing of sugarcane - Duty under Protest Refund of Duty Held that - As decided in Balrampur Chini Mills Ltd. vs. Union of India and others 2013 (1) TMI 525 - ALLAHABAD HIGH COURT - bagasse was a waste product and no more duty will be imposed over it - Bagasse and press mud were not final products of the manufacturer. The law was well settled that bagasse generated from the crushing of the sugarcane was neither manufactured goods nor manufactured final product, but it was a residue/waste - bagasse was nothing but a waste obtained during manufacture of sugar waste cannot be regarded as a final product exempt from duty for invoking provisions of Rule 57 CC of Central Excise Rules, 1944. Bagasse was classified under sub-heading 2303 20 00 of Central Excise Tariff Act - Neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners were not liable to duty either by payment or by reversal in respect of bagasse sold by the petitioner - As the petitioners have paid the entire duty and interest under protest, the entire deposited amount shall returned to them - waste was never manufactured and it only emerges in the process of manufacture of final product, Rule was not applicable to bagasse which was admittedly a waste, which emerges from the crushing of sugarcane for the manufacture of final product, namely, sugar.

Summary

Issues:
1. Classification of bagasse as a waste product.
2. Imposition of duty on bagasse.
3. Applicability of Rule 6 of CENVAT Credit in relation to bagasse.
4. Legality of Circulars issued by authorities.
5. Refund of duty and interest paid under protest.

Classification of bagasse as a waste product:
The High Court referred to a previous judgment where it was established that bagasse, a byproduct of sugarcane crushing, is considered a waste product and not a final manufactured good. The Court cited various cases to support this position, emphasizing that bagasse is an agricultural waste and cannot be considered a dutiable item under the Central Excise Act. The Court also noted the classification of bagasse under the Central Excise Tariff Act and upheld the previous judgment regarding the nature of bagasse as a waste product.

Imposition of duty on bagasse:
The Court reiterated that bagasse and press mud are not final products of a manufacturer, based on previous rulings in similar cases. It was held that the recovery of an amount related to the waste bagasse and press mud cleared by a sugar company was not justified. The Court emphasized that duty cannot be imposed on bagasse as it does not involve any manufacturing activity, even with the addition of an explanation under the Central Excise Act. Circulars issued by authorities attempting to impose duty on bagasse were deemed liable to be quashed based on the judgments provided.

Applicability of Rule 6 of CENVAT Credit in relation to bagasse:
The Court examined the impugned notice mentioning Rule 6 of the CENVAT Credit, which required payment based on the sale value of exempted final products. It was clarified that since the petitioners were not liable to duty for bagasse sold by them, neither penalty nor interest could be charged. The petitioners who had paid duty and interest under protest were entitled to a refund of the deposited amount.

Legality of Circulars issued by authorities:
The Court declared that Circulars issued by the Central Board of Excise and Customs, as well as the Circular issued by the Central Excise, U.P., Lucknow, along with the demand notice issued by the Joint Commissioner, Customs Central Excise and Service Tax, were quashed. The basis for issuing the demand, as per the Circulars, was found to be unsustainable in light of the settled position regarding the classification of bagasse as a waste product.

Refund of duty and interest paid under protest:
In light of the judgment and order, the Court directed the return of the entire duty and interest paid under protest by some petitioners within a specified timeframe. The Court emphasized that the settled controversy regarding the classification of bagasse as a waste product left no reason to admit the present appeal, ultimately dismissing it for lack of merit.