BAGASSE

[Mr. M. GOVINDARAJAN]

It is well settled that ‘bagasse’ is generated from the crushing of the sugar cane. It is neither manufactured goods nor manufactured final product. It is a residue or waste. The bagasse is mainly used as fuel in the factory for manufacture of final products.  The bagasse is classified under sub heading 2303 20 00 of Central Excise Tariff Act, 1985 as ‘Beat-Pulp’. Bagasse and other waste of sugar manufacture are with NIL rate of duty.

In ‘Commissioner of Central Excise V. Shakumbhari Sugar and Allied Industries Limited’ – 2003 (9) TMI 268 - CESTAT, NEW DELHI  it was held that the bagasse obtained during the course of manufacture of sugar out of sugar cane may find an entry in Schedule to the Central Excise Tariff but it does not become a final product merely on such activity.  Such bagasse is nothing but a waste obtained during the manufacture of sugar.  Waste cannot be regarded as a final product exempt from duty for invoking provisions of Rule 57CC of erstwhile Central Excise Rules, 1944.

In ‘Balarampur Chini Mills Limited V. Union of India’ – 2013 (1) TMI 525 - ALLAHABAD HIGH COURT the High Court held that it is not in dispute that the bagasse is an agricultural waste of sugar cane though marketable product, but the duty cannot be imposed as it does not involve any manufacturing activity simply by adding an explanation under Section 2(d) of the Act, 1944 whereby the definition of ‘goods’ has been defined will not make bagasse which is an agricultural waste to be a dutiable item.   Therefore, neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are not liable to duty either by payment or by reversal in respect of bagasse sold by the petitioner.   As the petitioners have paid the entire duty and interest under protest, the entire deposited amount shall be returned to them.

In ‘Indian Potash Limited V. Commissioner of Central Excise, Allahabad’ – 2012 (12) TMI 347 - CESTAT, NEW DELHI  the Tribunal found that bagasse emerges in course of crushing of sugar cane.  Crushing of sugar cane is necessary to extract cane sugar which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugar cane. Therefore by no stretches of imagination it can be said that the assessee possibly could have maintained separate accounts for the inputs for the production of sugar and molasses (excisable item) and bagasse. There is no possibility of any import chemicals etc., having been used at that stage.  The Tribunal held that the assessee was required to pay amount equal to 8% of sale value of bagasse.

In ‘G.M. Sugar and energy Private Limited V. Commissioner of Central Excise, Bangalore – II’ – 2014 (6) TMI 52 - CESTAT BANGALORE the appellant is a manufacturer of sugar. Bagasse and press mud which arises as a waste during the course of manufacture of sugar has been sold by the appellant without payment of excise duty. The department has required them to deposit 10% of the value in accordance with the Rule 6(3) of CENVAT Credit Rules, 2004 on the ground that the appellant did not maintain separate accounts in respect of ‘inputs’ and ‘input services’ used in the manufacture of sugar and other products. The Tribunal held that where the waste product arises and sold without payment of duty, there is no need to maintain separate accounts and there is no need to pay 10% of the value in accordance with Rule 6(3) of CENVAT Credit Rule, 2004.

In ‘Bajaj Hindustan Limited V. Commissioner of Central Excise, Meerut – I ‘–2012 (12) TMI 104 - CESTAT NEW DELHI  it was held that bagasse generated in the course of crushing sugar cane is not exercisable item notwithstanding the amendment of Section 2(d) of the Central Excise Act, 1944 vide Finance Act, 2008 which became operative with effective from 13.05.2008.  Rule 6(3) would not be applicable and as such amount under this Rule would not be recoverable in respect of clearance of bagasse.