2016 (5) TMI 1444 - AT - Central Excise

CENVAT Credit - Rule 6(3) of the CCR - whether Respondent is required to discharge an amount equivalent to 5% / 8% of the value of Bagasee, Press mud & Bio-compost sold by the Respondent? - Held that - Provisions of Rule 6(3) of the CCR are applicable only to a situation where exempted as well as dutiable products are manufactured by an assessee out of common inputs and no separate records are maintained. Apex Court s decision in the case of Union of India vs. DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT held that provisions of Rule 6 of CCR shall have no application as Bagasee is not a product of manufacture - The same is true to the products Press mud and Bio-compost. Respondent is not liable to pay 5% / 8% of the sale proceeds of these products - appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the Respondent is required to pay an amount equivalent to 5%/8% of the sale value of exempted products.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals), Patna. The Revenue argued that the Respondent is using cenvatable inputs in the manufacture of both dutiable and exempted products, and as per Rule 6(3) of the Cenvat Credit Rules, 2004, the Respondent should pay an amount equivalent to 5%/8% of the sale value of exempted products since separate accounts of inputs are not maintained. The Revenue contended that the First Appellate Authority's order was incorrect and should be set aside. On the other hand, the Respondent argued that the cenvatable inputs are not used in the production of exempted products like Bagasee, Press mud, and Bio-compost, as these are waste products arising during the sugar manufacturing process. The Respondent relied on a case law where it was held that items like Bagasee cannot be considered manufactured goods.

Upon hearing both sides and examining the case records, the Tribunal considered whether the Respondent is obligated to pay 5%/8% of the value of Bagasee, Press mud, and Bio-compost. Referring to a decision of the Apex Court in the case of Union of India vs. DSCL Sugar Ltd., it was noted that Rule 6 of the Cenvat Credit Rules does not apply to products like Bagasee, as they are not products of manufacture. The Rule is applicable when both exempted and dutiable products are made from common inputs without separate records. The Apex Court clarified that products like Bagasee, Press mud, and Bio-compost are not the result of manufacturing processes but rather agricultural residues. Consequently, the Respondent is not liable to pay the specified percentage of the sale proceeds of these products as per the law established by the Apex Court.

In conclusion, the Tribunal dismissed the Revenue's appeal, following the legal principles set forth by the Apex Court regarding the non-applicability of Rule 6(3) of the Cenvat Credit Rules to products like Bagasee, Press mud, and Bio-compost.