2018 (9) TMI 1913 - AT - Central Excise

CENVAT Credit - by-product - Bagasse Press-mud and Ash arising during the course of the manufacture of Sugar Molasses - whether the provisions of Rule 6 of CCR 2004 would be applicable in case of emergence of by-products namely Bagasse Press-mud and Ash during the course of the manufacture of Sugar Molasses? HELD THAT - During the course of manufacture of sugar the products namely bagasse press mud and ash are generated. Such by-products emerged during the course of manufacture of sugar cannot be considered as final product in as much as the respondent had never intended to manufacture those byproducts and the same emerges involuntarily during the process of manufacture of the final product. Since bagasse and press mud removed from the factory are excisable goods classified under Chapter 23 of the Tariff Act the circular dated 25.04.2016 relied upon by revenue cannot sustain the demand in as much as explanation 1 appended to Rule 6 ibid only clarified that the final product defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for consideration from the factory - Since the disputed goods are admittedly excisable the case of the respondent is not covered under the explanation appended to Rule 6 of the rules. There is no infirmity in the impugned order passed by the learned Commissioner (Appeals) - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of Rule 6 of CENVAT Credit Rules, 2004 regarding by-products Bagasse, Press-mud, and Ash during sugar and molasses manufacture.

Analysis:
The appeal was against an order passed by the Commissioner (Appeals), Central Excise, Pune, regarding the classification of by-products Bagasse, Press-mud, and Ash during the manufacture of Sugar & Molasses under Chapter 17 of the Central Excise Tariff Act, 1985. The main issue was whether Rule 6 of the CENVAT Credit Rules, 2004 would be applicable to these by-products. The Commissioner (Appeals) had allowed the appeal in favor of the respondent, stating Bagasse and Press-mud are non-excisable goods and not liable under Rule 6. The Revenue argued that the amended Rule 6 applies to exempted goods, including non-excisable goods, and relied on a circular clarifying the application of Rule 6 to by-products like Bagasse.

The Tribunal noted that Bagasse, Press-mud, and Ash are generated during the sugar manufacturing process but are not intended final products. Referring to past judgments, including the Bombay High Court and Supreme Court decisions, the Tribunal emphasized that Rule 6 applies to final products, not waste or by-products. A specific case, Shivratna Udyog Ltd. & Ors., held that Bagasse and Press-mud should not be subject to Rule 6 payment when cleared from the factory, post the amended Rule effective from March 2015. Since Bagasse and Press-mud are excisable goods, the circular cited by Revenue does not apply, as it pertains to non-excisable goods cleared for consideration. The Tribunal concluded that the respondent's case does not fall under the amended Rule 6 explanation.

In light of the above analysis, the Tribunal found no issue with the Commissioner (Appeals) order and dismissed the appeal filed by the Revenue.