Baggase is an agricultural waste emerged in process of manufacture of sugar- baggase is not a manufactured exempted item- CE circulars held invalid.

[C.A. DEV KUMAR KOTHARI]

References and links:

Balrampur Chini Mills Ltd. & Others Versus Union of India and others 2013 (1) TMI 525 - ALLAHABAD HIGH COURT – recent.

Balrampur Chini Mills Ltd. in Civil Appeal No. 2791 of 2005, decided on 21.7.2010 by SC

Commissioner of Central Excise. Meerut Versus M/s. Shakumbari Sugar & Allied Ind. Ltd.  2005 (8) TMI 615 - SUPREME COURT OF INDIA  

Commissioner of Central Excise Meerut-II v. M/s. Kichha sugar Co. Ltd.] judgment of the Supreme Court dated 20th February, 2004 in Civil Appeal No. D27628/2003 

Union of India vs. Ahmedabad Electricity Co. Ltd and others 2003 (10) TMI 47 - SUPREME COURT OF INDIA,

Mercury Laboratories Pvt. Ltd. vs. State of U.P. and others, 1999 (12) TMI 829 - ALLAHABAD HIGH COURT LARGER BENCH

Commissioner, Central Excise v. Gas Authority of India Ltd. [2007 (11) TMI 276 - SUPREME COURT],

Mahalakshmi Sugar Mills and Commissioner Central Excise, Meerut versus U. P. State Sugar Corporation.

Rallies India Ltd. v. Union of India [2008 (12) TMI 46 - HIGH COURT BOMBAY].

Baggase is agricultural waste:

Sugar cane is crushed to obtain sugar cane juice. We drink juice of sugar cane, it is an agricultural product. Sugar cane juice may be further processed to make sugar, gud or khandasari.

In process of manufacture of sugar, sugar cane is crushed sugar cane juice is obtained from crushing department and sent to other manufacturing process namely juice boiling.

A juice vendor crushing sugar cane and any other fruits in juice shop, generally throwaway leftover waste and we can see animals eating it on road side. In case of large scale leftover residue the same is to be disposed of by sending to dairy or farms.

In sugar mills also baggase is a waste left after of crushing of sugar cane and it emerges or is left after crushing of sugar cane. In sugar mills it is on large scale and has to be disposed off. In sugar mills a large quantity of baggase is used in lieu of fire wood to run boilers. If extra Baggase is found and it can be sold in nearby area, then it is sold otherwise may have to be used or fired and destroyed as a measure of disposal of waste.

Whether sugar cane is crushed by a road side juice vendor, or a restaurant or sugar mill, the left over that is Baggase is considered as a waste items emerging in process of extraction of sugar cane juice from sugar cane. The roadside vendor, restaurant or sugar mill are not known as a producer of Baggase.

No manufacture:

In case of Baggase there is no manufacture of any product like Baggase. Baggase is not a final product. A sugar manufacturer is known as sugar manufacturer and not as a producer or manufacturer of Baggase. In general terms and usages and also commercial world Baggase is not regarded as a manufactured product.   

Well settled factual, commonly known and legal position:

Baggase in a sugar mill is an agricultural waste. This is what a common man understand and is known in commercial world. However, disputes have been raised by revenue from time to time in zeal of raising revenue by treating Baggase as manufactured product, excisable product or exempted product etc. The Supreme court has also held again and again that baggase in sugar mill is agricultural waste, it is not a manufactured product. However, by making some changes in law, revenue have been making attempt to impose duty in direct or indirect manner by denying CENVAT.

Circulars of Board and Commissioner can be challenged:

It has been held that a circular issued by apex authority like board or senior authority like commissioner is binding on lower authorities and they have no option but to follow the same in administration of particular law or particular matter. Therefore, if a circular or instruction is contrary to provisions, a Writ Petition is maintainable on such circular and against the revenue. The revenue cannot take plea that the taxpayer has alternate remedy to adopt appeal procedure. Therefore, Courts have time and again held that validity of circulars or instructions can be challenged in court of law. The readers can find rulings to this effect while reading judgments reproduced below with highlights.

Circulars holding baggase as an exempted item requiring payment of duty under CENVAT Rules held invalid:

The Allahabad High Court considered Circulars issued by CBEC and Commissioners and show cause notices issued in pursuance of such circulars. And held that Writ Petitions are maintainable invalid circulars were struck down and declared invalid. Duty collected in pursuance of such circulars has also been directed to be refundable.

Un-necessary Litigation:

From the cases under reference it is clear that revenue is indulging into un-necessary and unjustified litigation. When case is decided against revenue, some amendments are made in an attempt to overcome the judgments against revenue. However, while doing so, many times it is noticed that amendments are made which are contrary to basic principals and objects of particular law and many times against constitutional provisions. For example, in case of Central Excise, an item which is not manufactured or which is not a product manufactured is deemed to be manufactured and exempted items and attempt is made either to levy duty or demand repayment or reversal of CENVAT etc.

Similarly in case of service tax amendments have been made to deem certain services, though there is no service at all.

In case of income tax, definition of income have been widened even to include various type of capital receipts in scope of income, although there is no income at all. Instead of asking the tax authorities to examine and prove that there is income, introduced as capital, the government has found an easier way to include capital receipts in definition of income.

Many of amendments are just to make work of revenue authorities easy by adopting deemed meanings in totally artificial and unjustified manner. Many times just to overcome judicial pronouncements. Thus there is a show of power in highhanded manner and such attitude of government and its officers must come to an end.