2019 (10) TMI 1100 - AT - Central Excise

Reversal of CENVAT Credit - waste/by-product - bagasse - non-maintenance of separate records - Rule 6(3A) of Cenvat Credit Rules, 2004 - HELD THAT - The Hon ble Supreme Court in the matter of UOI vs. D.S.C.L. Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT has laid down that Bagasse is agricultural waste of sugarcane and the waste and residue of agricultural product during the process of manufacture of goods cannot be said to be result of any process. Admittedly, there is no manufacturing process involved in Bagasse s production. Bagasse, pressmud and composed fertilizer is not goods but merely a waste or byproduct therefore Rule 6 of the Cenvat Rules shall have no application in the present case and they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 1.3.2015 in Rule 6 ibid has wrongly been relied upon by both the authorities below while coming to the conclusion that the assessee is liable to reverse the Cenvat Credit availed by them. The Hon ble Supreme Court in the matter of D.S.C.L. Sugar Ltd. has laid down that bagasse being an agricultural waste or residue, there could be no manufacturing activity. If that is so and if bagasse is not manufactured, the same cannot be held to be excisable, in which case the amendment which has been relied upon by the authorities below as well as by the Revenue, would not apply. Even after amendment to Rule 6 ibid, bagasse which emerges as a waste/ byproduct, falls outside the scope of the said Rule - Appeal allowed - decided in favor of assessee.

Summary

Issues involved:
Reversal of Cenvat Credit on bagasse under Rule 6 for not maintaining separate accounts.

Detailed Analysis:

1. Issue of Cenvat Credit Reversal: The Appellate Tribunal addressed the issue of reversing Cenvat Credit on bagasse under Rule 6 of the Cenvat Credit Rules, 2004. The Appellants, engaged in the manufacture of excisable goods, availed Cenvat Credit for inputs and services. The Revenue contended that bagasse, a byproduct, should be considered excisable goods and subject to Cenvat Credit reversal. The Adjudicating Authority confirmed a demand for reversal, which was upheld with modifications by the Commissioner. The Appellant argued against the reversal, citing legal precedents supporting their position that waste or byproducts do not require Cenvat Credit reversal under Rule 6.

2. Interpretation of Rule 6 Amendments: The Tribunal analyzed the amendments to Rule 6 effective from March 1, 2015, particularly the inclusion of non-excisable goods cleared for consideration under exempted goods. The Revenue argued that Rule 6 applied to bagasse clearance despite it being non-excisable. However, the Tribunal referenced a Supreme Court ruling stating that bagasse, as agricultural waste, does not undergo a manufacturing process and should not be considered excisable goods. The Tribunal concluded that the amendments did not change the nature of bagasse as waste or byproduct, exempting it from Rule 6 requirements.

3. Legal Precedents and Consistent Interpretation: The Tribunal considered various legal cases cited by both parties, emphasizing the consistent view that bagasse, as waste or byproduct, falls outside the scope of Rule 6. Rulings highlighted that manufacturing activity is essential for Rule 6 applicability, which does not apply to bagasse as it is an unavoidable agricultural waste. The Tribunal aligned with previous decisions and the Supreme Court's interpretation, emphasizing that bagasse does not qualify as excisable goods, thus exempt from Cenvat Credit reversal.

4. Judgment and Relief: After thorough analysis, the Tribunal allowed the Assessee's Appeal, concluding that bagasse, as a waste/byproduct, falls outside Rule 6's scope even after the amendments. Consequently, the Revenue's Appeal was dismissed. The decision provided consequential relief to the Assessee, aligning with the consistent legal interpretation and precedents cited during the proceedings.

This detailed analysis of the judgment showcases the Tribunal's in-depth consideration of legal provisions, amendments, precedents, and the specific nature of bagasse as a byproduct in determining the applicability of Cenvat Credit reversal under Rule 6 of the Cenvat Credit Rules, 2004.