2021 (9) TMI 750 - AT - Central Excise

Reversal of Cenvat Credit - input - input services - pressmud - wastes generated during manufacturing of sugar/molasses - exempt goods - Rule 6(3)(i) of CENVAT Credit Rules, 2004 - HELD THAT - In the instant case appellant had been asked to reverse the credit with interest etc. against clearance of pressmud. However, it has been made crystal clear that bagasse (a similar waste product like pressmud) is not a manufactured product but is only an agricultural waste and residue, which is not the result of any process and therefore cannot be treated as falling within the definition of Section 2(f) of the Central Excise Act, 1944 that defined a manufacturer and in the absence of manufacturing, there cannot be any excise duty and therefore, Rule 6 of the CENVAT Credit Rules, 2004 shall have no application. In obedience to the judicial precedent set by the Hon'ble Apex Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT , such executive instruction as contained in the Circular dated 25.04.2016 at para 4.2 is not enforceable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability on pressmud and wastes generated during manufacturing of sugar/molasses.
2. Application of Rule 6(3)(i) of CENVAT Credit Rules, 2004 regarding payment of 5% / 6% value of exempted goods.

Issue 1: Taxability on Pressmud and Wastes Generated during Manufacturing of Sugar/Molasses

The appeal addressed the taxability of pressmud and wastes generated during the manufacturing of sugar/molasses. The Tribunal considered the withdrawal of circulars/instructions on the excisability of by-products like bagasses based on Circular No. 904/24/2009-CX. The Tribunal referenced the Supreme Court's decision in the case of M/s Union of India and Ors vs M/s DSCL Sugar Ltd [2015-TIOL-240-SC-CX], where it was established that bagasse is not a manufactured product. Additionally, the Bombay High Court in the case of M/s Hindalco Industries Ltd. vs. Union of India [2015(315)E.L.T.10 (Bom.)] reached a similar conclusion regarding other non-ferrous metal by-products. Subsequently, circulars and instructions on the subject were rescinded, paving the way for adjudication of relevant cases.

Issue 2: Application of Rule 6(3)(i) of CENVAT Credit Rules, 2004

The second issue revolved around the reversal of CENVAT credit on input and input services as per Rule 6 of the CENVAT Credit Rules, 2004. The Tribunal highlighted the confusion arising from the circular dated 25.04.2016, which reiterated the need to treat non-excisable goods like bagasse, dross, and skimmings as exempted goods for credit reversal purposes. Despite this executive instruction, the Tribunal emphasized the Supreme Court's ruling that bagasse is not a manufactured product, aligning with the absence of excise duty on agricultural waste products. The Tribunal concluded that the executive instruction in the circular was unenforceable based on the judicial precedent set by the Supreme Court. Consequently, the appeal was allowed, setting aside the order of the Commissioner of Central Excise (Appeals), Pune-II.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT MUMBAI highlighted the key issues of taxability on pressmud and wastes generated during sugar/molasses manufacturing and the application of Rule 6 of the CENVAT Credit Rules, 2004. The Tribunal's decision was informed by legal precedents and the interpretation of relevant statutes, ultimately leading to the allowance of the appeal and the setting aside of the previous order.