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2018 (10) TMI 1153 - AT - Central ExciseCENVAT credit - During the course of manufacture of dutiable Sugar & Molasses, Bagasse emerges as a waste/by-product, which was being cleared by the Appellant at Nil rate of duty - non-maintenance of separate records for the dutiable product and exempted product as required under Rule 6(2) of the CENVAT Credit Rules, 2004, nor followed the procedural under Rule 6(3A) of the CENVAT Credit Rules, 2004 - Circular No. 1027/15/2016-CX dated 25.04.2016. Held that - The Hon ble Supreme Court s decision in the matter of DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT has clearly laid down that bagasse is agricultural waste of sugarcane and the waste and residue of agricultural products, during the process of manufacture of goods cannot be said to be result of any process. There is no manufacturing process involved in Bagasse s production. Bagasse is not goods but merely a waste or by-product, therefore Rule 6 of CENVAT Credit Rules, 2004 is not applicable in the present case - Bagasse is bound to come into existence during the crushing of the sugarcanes and is an unavoidable agricultural waste. For two reasons the Board s Circular dated 25.04.2016 has no application on the facts of the instant case, firstly no Circular can override the Rules as well as the law laid down by the Hon ble Supreme Court and the orders of this Tribunal, and secondly the said Circular was issued on 25.04.2016 i.e. on a later date, whereas the period in dispute is March, 2015 to June, 2015. Almost all the decisions cited by Learned Counsel for the appellant are on identical issue and in all the decisions, this Tribunal has taken a consistent view that Rule 6 of CENVAT Credit Rules, 2004 has no application in given facts. Appeal allowed - decided in favor of appellant.
Issues:
- Availing CENVAT credit on "Bagasse" without maintaining separate accounts. - Demand for payment under Rule 6 of CENVAT Credit Rules, 2004. - Applicability of Rule 6 to waste/by-products like "Bagasse." - Interpretation of the explanation to Rule 6 regarding non-excisable goods. - Comparison of various judicial decisions on the issue. Analysis: 1. The appeals were filed against the Order-in-Appeal passed by the Commissioner regarding the availing of CENVAT credit on "Bagasse" without maintaining separate accounts, as required by Rule 6(2) of the CENVAT Credit Rules, 2004. The department issued a show-cause notice demanding payment under Rule 14 of the Rules, leading to a subsequent Order-in-Original confirming part of the demand for a specific period. 2. The main contention revolved around the applicability of Rule 6 to waste/by-products like "Bagasse." The Appellant argued that "Bagasse" is a waste of finished goods and, therefore, no payment should be required. Citing various judicial decisions, including the Supreme Court's ruling in the DSCL Sugar Ltd. case, the Appellant contended that Rule 6 does not apply to waste or by-products generated during manufacturing processes. 3. The Revenue, however, supported the demand based on a Circular clarifying that "Bagasse" cleared from the factory should be treated as exempted goods for credit reversal purposes under Rule 6. The insertion of an explanation to Rule 6 in 2015 expanded the scope to include non-excisable goods cleared for consideration, such as "Bagasse," within the rule's ambit. 4. The Tribunal analyzed the conflicting interpretations and referred to several decisions, including the case of M/s Shivratna Udyog Ltd. & Others, where it was held that Rule 6 does not apply to waste or by-products. The Tribunal emphasized that the law laid down by the Supreme Court and previous Tribunal orders take precedence over subsequent Circulars, especially when dealing with non-excisable goods like "Bagasse." 5. Ultimately, the Tribunal allowed the appeals, concluding that Rule 6 did not apply to waste or by-products like "Bagasse." The consistent view taken by the Tribunal in similar cases supported this decision, emphasizing that CENVAT credit cannot be denied for inputs contained in waste or by-products. The Tribunal's decision was based on the understanding that Rule 6(3) does not extend to waste or by-products, aligning with previous judicial precedents and interpretations.
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