2018 (8) TMI 6 - AT - Central Excise

CENVAT Credit - Bagasse as also Press Mud arising in the course of manufacture of sugar and molasses, cleared without payment of duty - demand of an amount equal to 6% of value of the same in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 - whether Bagasse and Press Mud can be considered to be goods whether excisable or non-excisable? Held that - It stands held in decision of the Hon ble Allahabad High Court in the case of COMMISSIONER, CENTRAL EXCISE, LUCKNOW VERSUS M/S KISAN SAHAKARI CHINI MILLS LTD 2013 (10) TMI 1197 - ALLAHABAD HIGH COURT that Bagasse is agricultural waste of sugarcane and even though marketable duty cannot be imposed on the same and adding of explanation to definition of goods in section 2(d) will not make Bagasse a dutiable item. Admittedly Bagasse is bound to come into existence during the crushing of the sugarcanes and is an unavoidable agricultural waste. It cannot be said that the same emerges as a result of manufacture or any other process and cannot be equated with the word goods - The explanation added to the Rule 6 which is to the effect that for the purposes of this Rule, exempted goods or final products as defined in Clauses D & H of Rule 2 shall include non-excisable goods cleared for consideration from the factory - the explanation added to Rule 6 will not change the scenario declared by Hon ble Allahabad High Court. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Section 2(d) of the Central Excise Act, 1944 regarding the marketability of Bagasse and Press Mud.
2. Application of Rule 6(3)(i) of Cenvat Credit Rules, 2004 to clear Bagasse without payment of duty.
3. Impact of the amendment to Rule 6(1) of Cenvat Credit Rules, 2004 on the treatment of Bagasse as exempted goods.
4. Consideration of judicial precedents and circulars in determining the dutiability of Bagasse and Press Mud.

Analysis:
1. The case revolved around the marketability of Bagasse and Press Mud by the appellant, who availed Cenvat credit for duty paid on inputs. The Revenue contended that post-amendment in Section 2(d) of the Central Excise Act, 1944, Bagasse should be cleared by reversing 6% of its value under Rule 6(3)(i) of Cenvat Credit Rules, 2004. The original adjudicating authority and Commissioner (Appeals) upheld the demand raised by the Revenue.

2. The Tribunal referred to the Allahabad High Court's decisions and held that Bagasse being agricultural waste of sugarcane is not marketable, and the explanation in Section 2(d) does not make it dutiable. Previous judgments and a Supreme Court decision supported this view, emphasizing that Bagasse does not undergo a manufacturing process to be considered as goods. The Tribunal rejected the Revenue's claim based on legal interpretations and set aside the impugned orders, allowing the appeal.

3. The Tribunal scrutinized the subsequent Circular issued by the Board after the amendment to Rule 6(1) of Cenvat Credit Rules, 2004. Despite the Circular's clarification on treating Bagasse cleared for consideration as exempted goods, the Tribunal emphasized that legal interpretations by higher authorities and judicial precedents take precedence over circulars. The Tribunal concluded that Bagasse and Press Mud do not qualify as goods under Rule 6 and overturned the decision based on the Circular.

4. In the final analysis, the Tribunal emphasized that Bagasse's classification as agricultural waste and residue of sugarcane exempts it from being considered dutiable goods. The Tribunal highlighted the importance of legal interpretations over circulars in resolving such issues. The judgment underscored that Bagasse's nature as agricultural waste precludes its treatment as goods subject to duty, aligning with previous judicial pronouncements and the Supreme Court's stance on the matter.