2018 (12) TMI 1574 - AT - Central Excise

CENVAT Credit - by-product - spent sulphuric acid - Rule 6(3) of the Cenvat Credit Rules - Held that - The explanation inserted in Rule 6(1) w.e.f. 01.03.15 is to the effect that - for the purpose of this Rule, exempted goods or final products as defined in Clauses (d) and (h) of Rule 2 shall include non excisable goods cleared for construction from a factory. The said explanation came to be interpreted by the Tribunal in the case of Kichha Sugar Company Ltd. Vs. CCE 2018 (10) TMI 1151 - CESTAT NEW DELHI and it was held that placing reliance in the case of Union of India vs. DSCL Sugar Ltd 2015 (10) TMI 566 - SUPREME COURT has held that products like bagasse and press-mud do not qualify the definition of Section 2F of CEA and as such are not being a manufacture. These are only an agricultural waste and residue which itself is not the result of any process and in the absence of manufacture, there cannot be any excise duty. Demand of reversal do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay duty on by-product clearance without payment.
2. Interpretation of Rule 6(1) with respect to exempted goods.
3. Applicability of Rule 6 to by-products released during the manufacturing process.

Analysis:
1. The issue in this case revolves around the liability of the appellants to pay duty on the clearance of spent sulphuric acid, a by-product emerging during the manufacture of linear alkyl benzene sulphonic acid. The Revenue contended that since the appellants were clearing the by-product without payment of duty, they were required to pay a part percentage of its value under Rule 6(3) of the Cenvat Credit Rules. This view was based on an amendment to the rules and despite a previous Tribunal order suggesting otherwise.

2. The Tribunal examined the explanation inserted in Rule 6(1) from 01.03.15, which stated that exempted goods or final products include non-excisable goods cleared for construction. The Tribunal referred to a previous case, Kichha Sugar Company Ltd. Vs. CCE, where it was held that the main condition for Rule 6, i.e., the obligation of a manufacturer or producer of final products, does not extend to by-products released during the manufacturing process without any additional manufacturing activity. Therefore, the Tribunal concluded that the appellant was not liable to pay duty as demanded for the specified periods.

3. The Tribunal cited other decisions, such as Shree Narmada Khand Udyog, Sahakari Mandali Limited Vs. CCE and Pannageshwar Sugar Mills Ltd. Vs. CCE, which supported the interpretation that Rule 6 does not apply to the clearance of by-products during the manufacturing process. Relying on these precedents, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, as there was no liability on the appellant to pay the demanded duty or reverse the credit for the specified periods.

This comprehensive analysis of the judgment highlights the key legal issues, interpretations of relevant rules, and the application of precedents that led to the decision in favor of the appellant.