2013 (10) TMI 1197 - HC - Central Excise

Cenvat Credit - Bagasse emerged as waste - Applicability of Rule 6 for production of exempted and non-dutiable goods Held that - Following Balrampur Chini Mills Ltd. vs. Union of India 2013 (1) TMI 525 - ALLAHABAD HIGH COURT - bagasse is a waste product and no more duty will be imposed over it - Bagasse and press mud are not final products of the manufacturer - Bagasse is classified under sub-heading 2303 20 00 of Central Excise Tariff Act - As per Rule 6 of the CENVAT Credit is availed on the inputs which are used in the manufacture of both dutiable and final products, then an amount equal to 10% (upto 6th July, 2009) or 5% (w.e.f. 7.7.2009) of the sale value of exempted final products is required to be paid - neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are 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 Decided against Assessee.

Summary

Issues:
1. Classification of bagasse as a waste product.
2. Imposition of duty on bagasse.
3. Legality of Circulars issued by authorities.
4. Applicability of Rule 6 of CENVAT Credit on bagasse.

Classification of bagasse as a waste product:
The High Court referred to a Division Bench judgment which established that bagasse, generated during sugarcane crushing, is considered a waste product and not a final manufactured item. The Court cited previous cases to support this view, emphasizing that bagasse is an agricultural waste and cannot be classified as a dutiable item under the Central Excise Act. The Court also mentioned the classification of bagasse under the Central Excise Tariff Act and the quashing of Circulars based on the judgment.

Imposition of duty on bagasse:
The Court held that bagasse and press mud are not final products of a manufacturer, as affirmed in previous cases. It was noted that recovery of an amount on waste bagasse and press mud was unjustified. The Court further highlighted that duty cannot be imposed on bagasse merely by adding an explanation under the Central Excise Act, as it does not involve any manufacturing activity. The judgment nullified Circulars that formed the basis for demanding duty on bagasse.

Legality of Circulars issued by authorities:
The Court examined Circulars issued by the Chief Commissioner and the Central Board of Excise and Customs, concluding that these Circulars were liable to be quashed based on the judgment regarding bagasse classification. The Court emphasized the need to return deposited amounts to petitioners who had paid duty and interest under protest.

Applicability of Rule 6 of CENVAT Credit on bagasse:
The Court addressed the impugned notice mentioning Rule 6 of CENVAT Credit, which required payment based on the sale value of exempted final products. It was clarified that petitioners were not liable to duty for bagasse sold, and therefore, penalty or interest could not be charged. The Court ordered the return of the entire deposited amount to petitioners who had paid duty and interest under protest.

In conclusion, the High Court dismissed the appeal, stating that the controversy had been settled by previous judgments, and there was no need to re-examine the issue. The Tribunal's judgment was deemed proper and legal, leading to the dismissal of the appeal for lack of merit.