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2024 (1) TMI 820 - AT - Central ExciseReversal of proportionate credit attributable to exempted goods - bagasse emerge as a by-product, during the course of manufacture of sugar - manufacture of both dutiable and exempted product - Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT - In the present case, during the course of manufacture of sugar, bagasse emerges as a by-product which over a period of time gets converted into press mud and bio compost and the same were cleared without payment of duty. Since these by-products were cleared without payment of duty, the Department alleged that the Appellant manufactured both dutiable and exempted product and hence, they are liable to reverse the Cenvat credit proportional to the value of exempted goods, as per Rule 6 of the Cenvat Credt Rules, 2004. The issue is no longer res integra as the Hon ble Supreme Court in case of UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT has categorically held that reversal of Cenvat Credit is not warranted in terms of Cenvat Credit Rules, 2004, when the by-product Bagasse is cleared from the factory without payment of duty. Thus, the demands confirmed in the impugned order is not sustainable and accordingly, the same is set aside - appeal allowed.
Issues:
The appeal against the Order-in-Appeal dated 04.01.2019 passed by the Commissioner (Appeals) of Customs, Central GST & Central Excise, Patna regarding the reversal of proportionate credit attributable to exempted goods as per Rule 6 of the Cenvat Credit Rules, 2004. Details of the Judgment: Issue 1: Reversal of Cenvat Credit for by-products cleared without payment of duty The Appellant, a manufacturer of sugar & molasses, cleared by-products like press mud and bio compost without payment of duty. The Department alleged that the Appellant manufactured both dutiable and exempted products, thus liable to reverse the Cenvat credit proportional to the value of exempted goods. The Appellant cited legal precedents, including the decision of the Hon'ble Supreme Court in Union of India Vs. DSCL Sugar Ltd., supported by subsequent High Court and Supreme Court decisions and a relevant Circular issued by the Board. The Tribunal noted that the issue has been settled by the Supreme Court, holding that reversal of Cenvat Credit is not required when by-products like Bagasse are cleared without duty payment. The Tribunal also referred to the Board's Circular clarifying the treatment of such by-products as exempted goods for credit reversal purposes. Issue 2: Legal standing of Circulars and subsequent Supreme Court judgments The Tribunal considered the legal standing of Circulars and subsequent Supreme Court judgments on the issue of by-products like Bagasse. It highlighted the Circular dated 25-4-2016, which was later challenged in the case of Union of India v. M/s. Indian Sucrose Limited. The Supreme Court, in its judgment dated 4-3-2022, reiterated that Bagasse is non-excisable and the CENVAT Credit Rules do not apply to it. The Tribunal, following the decisions of the Supreme Court and the relevant Circulars, concluded that the demands confirmed in the impugned order were not sustainable and therefore set aside the same. Conclusion: Based on the legal precedents, Supreme Court decisions, and the Board's Circulars, the Tribunal allowed the appeal filed by the Appellant, providing consequential relief as per law.
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