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2022 (1) TMI 506 - AT - Central ExciseExcisable goods or not - Bagasse/press-mud - Section 2(d) of the Central Excise Act, 1944 - manufacturing activity is involved in the manufacture of bagasse/press-mud or not - Section 2(f) of the Central Excise Act, 1944 - bagasse/press-mud can be considered as final products in terms of CENVAT Credit Rules, 2004 or not - common inputs/input services were used for the manufacture of both dutiable goods(sugar and molasses) and exempted goods (bagasse/ press-mud) - non-maintenance of separate records - requirement to pay an amount equal to 5% of the value of the exempted goods i.e. bagasse/press-mud, as pre Rule 6(3) of CENVAT Credit Rules, 2004 - penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. HELD THAT - The issue is no more res integra as the question as to whether bagasse is manufactured under the provisions of Section 2(f) of the Central Excise Act, 1944 or otherwise and the CENVAT credit availed on the inputs which are used for the manufacture of sugar has to be denied or otherwise has been settled by the apex Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT where it was held that In the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application as rightly held by the High Court. Appeal allowed - decided in favor of appellant.
Issues involved:
1. Classification of bagasse/press-mud as excisable products and manufacturing activity involved. 2. Consideration of bagasse/press-mud as final products under CENVAT Credit Rules, 2004. 3. Requirement of payment equal to 5% of value of exempted goods under Rule 6(3) of CENVAT Credit Rules, 2004. 4. Usage of inputs in manufacturing dutiable and exempted goods. 5. Liability for penalty under Rule 15(2) of CENVAT Credit Rules, 2004 and Section 11AC of Central Excise Act, 1944. Detailed Analysis: 1. The main issue in this case was the classification of bagasse/press-mud as excisable products and whether any manufacturing activity was involved. The lower authorities had denied CENVAT credit on inputs used for manufacturing bagasse/press-mud due to their exempt status. The Hon'ble Apex Court in DSCL Sugar Ltd. case clarified that bagasse was agricultural waste and not a manufactured product, thus not subject to excise duty. 2. Another issue was whether bagasse/press-mud could be considered final products under CENVAT Credit Rules, 2004. The court referred to the DSCL Sugar Ltd. case where it was established that bagasse was agricultural waste and not a manufactured product, leading to the conclusion that CENVAT credit cannot be allowed on such items. 3. The question of whether the appellant was required to pay an amount equal to 5% of the value of exempted goods under Rule 6(3) of CENVAT Credit Rules, 2004 was also addressed. The court, following the DSCL Sugar Ltd. case, ruled that since bagasse was not a manufactured product, the appellant was not liable to pay such amount. 4. The issue of using inputs in manufacturing both dutiable and exempted goods was raised. The court reiterated the DSCL Sugar Ltd. case findings that bagasse was agricultural waste and not a manufactured product, thereby clarifying that the appellant was not required to pay any additional amounts or penalties. 5. Lastly, the liability for penalty under Rule 15(2) of CENVAT Credit Rules, 2004 and Section 11AC of Central Excise Act, 1944 was discussed. The court, in line with previous judgments, held that since bagasse was not a manufactured product, the appellant was not liable for any penalties. Consequently, the impugned order was set aside, and the appeal was allowed based on the precedents established by the Hon'ble Apex Court and subsequent cases.
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