2017 (6) TMI 970 - AT - Central Excise

Waste - Bagasse - CENVAT credit - Rule 6(3)(a) of CCR 2002/2004 - Held that - reliance placed in the case of Union of India Versus DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT , where it was held that Bagasse is only an agriculture waste and residue and also that Bagasse is not covered in the definition of manufacture - provisions of Rule 6(3)(a) of CCR 2002/2004 do not apply on the removal of Bagasse or utilization of Bagasse - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether Bagasse is an excisable commodity under the Cenvat Credit Rules 2002/2004.
2. Applicability of Rule 6(3)(a) of Cenvat Credit Rules 2002/2004 on the removal or utilization of Bagasse.
3. Validity of the Show Cause Notice issued to recover a specific amount from the appellant.

Issue 1: Bagasse as an excisable commodity
The Revenue alleged that Bagasse, being used in electricity generation, attracted nil rate of duty while sugar was manufactured and cleared at an appropriate rate of duty. The Show Cause Notice demanded a recovery from the appellant under Rule 12 & 14 of Cenvat Credit Rules 2002/2004. The appellant contested, citing the Hon'ble Supreme Court's ruling in the case of Union of India Versus DSCL Sugar Ltd., which held that Bagasse is an agricultural waste not covered under the definition of manufacture in the Central Excise Act, 1944. The appellant argued that since Bagasse is not an excisable commodity, Rule 6(3)(a) of Cenvat Credit Rules 2002/2004 does not apply.

Issue 2: Applicability of Rule 6(3)(a) of Cenvat Credit Rules
The appellant relied on the Supreme Court's decision to assert that Bagasse, being agricultural waste, does not fall under the definition of manufacture, hence exempt from the provisions of Rule 6(3)(a) of Cenvat Credit Rules 2002/2004. The Tribunal, after considering both parties' submissions and the Supreme Court's ruling, concurred that Bagasse is merely agricultural waste and not covered under the definition of manufacture. Consequently, the Tribunal held that Rule 6(3)(a) of Cenvat Credit Rules does not apply to the removal or utilization of Bagasse.

Issue 3: Validity of the Show Cause Notice
The Tribunal, based on the Supreme Court's interpretation of Bagasse as agricultural waste and not an excisable commodity, found the Show Cause Notice unsustainable. Consequently, the Tribunal set aside the Order-in-Original passed by the Commissioner of Central Excise, Lucknow, and allowed the appeal. The appellant was granted entitlement to any consequential relief as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, holding that Bagasse is not an excisable commodity under the Cenvat Credit Rules 2002/2004, and thus, the provisions of Rule 6(3)(a) do not apply to its removal or utilization. The Show Cause Notice demanding recovery from the appellant was deemed invalid, and the appeal was allowed with consequential relief granted to the appellant.