2022 (12) TMI 6 - AT - Central Excise

CENVAT Credit - exempt goods - pressmud, bagasse and boiler ash, generated during the manufacturing of sugar/molasses - common inputs used in manufacture of both taxable as well as exempt goods - non-maintenance of separate records - Rule 6(3) of Cenvat Credit Rules, 2004 vide notification dated 01.03.2015 - HELD THAT - The Hon ble Supreme Court in the matter of DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT while considering the amended definition of excisable goods and manufacture has laid down that that pressmud is agricultural waste of sugarcane and the waste 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 pressmud s production. Bagasse, pressmud and boiler ash are not goods but merely a waste or by-product therefore Rule 6 of the Cenvat Rules shall have no application in the such cases as they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 01.03.2015 in Rule 6 ibid has been wrongly relied upon by the authorities below in confirming the demand. As per Rule 6 ibid as amended, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under it and pressmud/ bagasse/boiler ash will not be covered under the said Rule despite being non-excisable goods since it emerges as agricultural waste or residue and are not manufactured goods - The Hon ble Supreme Court in the matter of DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT has laid down that bagasse being an agricultural waste or residue, there could be no manufacturing activity. The aforesaid decision squarely applies on the facts of the instant appeals and apart from bagasse, since pressmud and boiler ash are also emerged as waste, the same also cannot be held to be excisable. The principles of judicial discipline require that the orders of the higher appellate authorities and in particular the judgment/orders of the Hon ble Supreme Court should be followed unreservedly by the subordinate authorities. Constitution of India is above all the statutes in our country and its Article 141 specifically provides that the law declared by the Hon'ble Supreme Court shall be binding on all Courts within the territory of India and since the Commissioner is not above the Courts therefore it binds him as well. Judicial discipline and propriety demands that the Adjudicating Authority or the first Appellant Authority should follow the binding decisions of the Hon'ble Supreme Court/High Court and of course of the Tribunal and should refrain from making comments which are uncalled for. Provisions of Rule 6(3) ibid are applicable only when a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted from whole of duty or chargeable Nil rate of duty using Cenvat inputs. But here the manufacturer i.e. appellant here is not manufacturing bagasse or pressmud or boiler ash. These are by-products only and merely emerge as waste or residue while manufacturing sugar and molasses from sugar cane. None of the by-products falls within the definition of manufacture and in its absence nothing can be demanded from the appellant. It is not the case anywhere that after the amendment on 1.3.2015 by-products/ waste/residue have been included in the definition of manufacture and therefore the provisions of amended Rule 6(3) or Rule 6(2) ibid has no application and resultantly the demand raised by the revenue cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 post-amendment
- Liability to pay @5% /6% of the sale value of waste or by-products exempted during manufacturing of sugar/molasses
- Failure to maintain separate accounts for dutiable and exempted goods as per Rule 6(2)

Analysis:
1. The main issue in this judgment revolves around the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004 post-amendment. The question at hand is whether the appellant is liable to pay a percentage of the sale value of waste or by-products that are exempted, such as press mud, bagasse, and boiler ash, generated during the manufacturing of sugar/molasses due to the failure to maintain separate accounts for dutiable and exempted goods as required under Rule 6(2).

2. The appellant, a manufacturer of sugar and molasses, faced demands from the department for not maintaining separate accounts for exempted goods like press mud, bagasse, and boiler ash. The Adjudicating Authority and the first appellate authority upheld the demands, leading to the filing of appeals. The appellant argued that these by-products were waste/residue and cited relevant case laws to support their position.

3. The Tribunal, after considering the arguments presented, referred to the decision of the Hon'ble Supreme Court in DSCL Sugar Ltd., which clarified that press mud, bagasse, and boiler ash are agricultural waste and not manufactured goods. The Tribunal concluded that Rule 6 of the Cenvat Rules does not apply to such waste or by-products as they are an unavoidable agricultural residue and not goods subject to duty.

4. The Tribunal criticized the Commissioner for trying to distinguish the Supreme Court's decision in DSCL Sugar Ltd. and emphasized the importance of following binding decisions. The Tribunal reiterated that waste products like bagasse, press mud, and boiler ash fall outside the scope of Rule 6 and cannot be considered manufactured goods subject to duty.

5. Ultimately, the Tribunal allowed the appeal filed by the appellant, stating that the provisions of Rule 6(3) do not apply to waste or by-products like bagasse, press mud, and boiler ash, as they do not meet the definition of manufactured goods. The demand raised by the revenue was deemed unsustainable in light of the nature of these waste products.

6. The judgment, pronounced on 30.11.2022, provides a detailed analysis of the legal principles involved, emphasizing the distinction between waste products and manufactured goods under the Cenvat Credit Rules.