2012 (5) TMI 519 - AT - Central Excise

Duty demand - whether the appellant was required to pay 5% of the value of press mud/spent wash which comes into existence during the course of manufacture of sugar - Held that - bagasse emerges in course of crushing of the sugarcane. It may be noted that crushing of sugarcane is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane. Therefore by no stretch of imagination it can be said that the assessee possibly could have maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse. Thus in our considered view the amendment in Finance Act cited by Shri Nagesh Pathak AR and the Board s Circular would not make any difference in the facts and circumstances of the case. Moreover neither the SCN 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 Indian Potash Ltd. 2012 (12) TMI 347 - CESTAT NEW DELHI - ratio of the same is equally applicable to the press mud inasmuch as bagasse as also press mud came into existence as a waste product during the course of manufacture of sugar - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant was required to pay 5% of the value of press mud/spent wash due to it being considered an exempted excisable product.
2. Whether press mud should be deemed excisable and marketable based on the amendments to Section 2(d) and its sale for consideration.

Analysis:
1. The issue in this case revolved around the demand for payment by the appellant of 5% of the value of press mud/spent wash, a by-product of sugar manufacturing, under Rule 6(3)(b) of Cenvat Credit Rules. The demand was made on the basis that press mud is classified as an exempted excisable product. The Tribunal noted that press mud had been established as non-excisable in various decisions, including a Tribunal case and a Supreme Court decision. Despite this, the Revenue argued that post an amendment to Section 2(d), press mud should be considered marketable and hence excisable due to its sale for consideration by the appellants.

2. The Tribunal referred to a previous Division Bench decision regarding bagasse, another by-product of sugar manufacturing, to address the issue of press mud's excisability. The Division Bench held that as bagasse emerged during the sugar manufacturing process and could not be separated from the inputs used for sugar production, it was not feasible to maintain separate accounts for excisable and exempted final products. The decision emphasized that as bagasse arose as a waste product during sugar production, no common Cenvat credit inputs were used in its creation. Applying the same reasoning to press mud, which also arises as a by-product during sugar manufacturing, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellants.

In conclusion, the Tribunal ruled in favor of the appellant, determining that press mud should not be considered excisable and marketable despite the Revenue's arguments post the amendment to Section 2(d). The decision was based on established precedents and the nature of press mud as a by-product of sugar manufacturing, similar to bagasse.