2016 (11) TMI 352 - AT - Central Excise

Recovery of duty - CENVAT credit - byproduct - Rule 6(3)(b) of Cenvat Credit Rules 2004 - inputs used in or in relation to the manufacture of dutiable goods as well as in exempted product - whether the Press-mud emerges as a by-product during the course of manufacture of Sugar/Molasses be subjected to the provisions of Rule 6(3) of the Cenvat Credit or otherwise? - Held that - reliance placed on the decision of Balarampur Chini Mills Ltd Vs UOI 2013 (1) TMI 525 - ALLAHABAD HIGH COURT where it was held that sugar is the final product and molasses is an intermediary product or by-product, therefore, for applicability of Rule 6, the manufacture of dutiable goods and manufacture of exempted goods are conditions precedent. Since waste is never manufactured and it only emerges in the process of manufacture of final product, Rule is not applicable to bagasse which is admittedly a waste, which emerges from the crushing of sugarcane for the manufacture of final product, namely, sugar. Recovery of duty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether Press-mud emerging as a by-product during the manufacture of Sugar/Molasses is subject to Rule 6(3) of the Cenvat Credit Rules or not.

Analysis:
The appeal was filed against an order passed by the Commissioner (Appeals), Central Excise, Customs, and Service Tax-SURAT-II. The appellant, engaged in manufacturing excisable goods, availed Cenvat Credit on Inputs and Input Services. A demand notice was issued for recovery under Rule 6(3)(b) of Cenvat Credit Rules 2004 due to the lack of separate records on the consumption of inputs used in the manufacture of dutiable goods and Press-mud, considered an exempted product. The demand was confirmed, and a penalty imposed, leading to the appeal. The appellant argued that Press-mud, a by-product, should not be considered an exempted excisable good. This argument was supported by judgments from the Allahabad High Court and the Tribunal. The issue was whether Press-mud, as a by-product, should be subjected to Rule 6(3) of the Cenvat Credit Rules. The judgment cited the Allahabad High Court's observation that waste products emerging during the manufacture of final products are not considered the manufacture of exempted goods, thus exempting Press-mud from the rule's application. Consequently, the impugned order was set aside, and the appeal was allowed.

This detailed analysis of the legal judgment highlights the key issues involved, the arguments presented by the parties, the relevant legal provisions, and the final decision rendered by the tribunal.