2023 (10) TMI 876 - AT - Central Excise

CENVAT Credit - manufacture of sugar and molasses - Clearance of bagasse and pressmud (exempted products), emerging during the manufacture of the final product (sugar) - non-maintenance of separate accounts for the common input services used in the manufacture of both dutiable and exempted products contravention of provisions of Rule 6 of the CENVAT Credit Rules, 2004 - HELD THAT - In terms of Explanation 1 to Rule 6 of the CENVAT Credit Rules, which was inserted with effect from 01.03.2015, the appellant has to reverse the credit or pay 6% of the value of the exempted products in case non-excisable goods are cleared for a consideration. The Board had also issued a Circular in line with the above Explanation. However, the said Circular came to be challenged before the Hon ble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. 2019 (5) TMI 972 - ALLAHABAD HIGH COURT and the same was held to be invalid and quashed. The Tribunal in a recent decision in the case of Khedut Sahakari Khand Udyog Mandli Ltd. 2022 (4) TMI 1360 - CESTAT AHMEDABAD has followed the above decision of the Hon ble Allahabad High Court to set aside the demand. The demand cannot sustain and requires to be set aside - Appeal allowed.

Summary

Issues:
The issue involved in the present appeal is whether the appellant is liable to pay an amount equivalent to 6% of the value of the bagasse / pressmud cleared by them.

Details of the Judgment:

The appellant, engaged in the manufacture of 'sugar' and 'molasses', availed CENVAT Credit on inputs and input services. The Department alleged a contravention of Rule 6 of the CENVAT Credit Rules, 2004, as the appellant did not maintain separate accounts for common input services used in the manufacture of both dutiable and exempted products. The Department demanded 6% of the value of exempted products for a specific period, leading to a Show Cause Notice and subsequent penalties confirmed by the original authority.

The appellant argued that a Supreme Court decision and subsequent amendment to the CENVAT Credit Rules exempted bagasse/pressmud from being considered exempted goods. They referenced Circulars and High Court decisions to support their stance. The appellant contended that the demand should be set aside based on legal interpretations and precedents.

After considering the arguments and legal provisions, the Tribunal found that the demand could not be sustained. The Tribunal referred to the Explanation 1 to Rule 6 of the CENVAT Credit Rules, introduced in 2015, and highlighted that recent decisions supported the appellant's position. Citing a recent decision by the Tribunal following a High Court ruling, the Tribunal set aside the demand, allowing the appeal with consequential reliefs.

In conclusion, the impugned order was set aside, and the appeal was allowed based on the legal interpretations and precedents presented during the proceedings.