2013 (4) TMI 180 - AT - Central Excise

Waiver of pre-deposit - Cenvat Credit - manufacture of sugar during which bagasse emerges maintenance of separate account and inventory of the inputs used in or in relation to manufacture of dutiable final and exempted products - Held that - crushing of sugarcane is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. - Bagasse is the waste product left after the crushing of sugarcane. Therefore, by no stretch of imagination it can be said that the assessee possibly could have maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse. Moreover, neither the show cause notice nor the impugned order in appeal mentions as to which common Cenvat credit availed inputs have been used in manufacture of sugar and, molasses (dutiable final product) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any inputs-chemicals etc. having been used at that stage. - demand set aside - decided in favor of assessee.

Summary

Issues:
- Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 regarding maintaining separate accounts for dutiable and exempted final products.
- Application of the amendment in Finance Act and Board Circular regarding bagasse as an exempted excisable good.
- Validity of the demand for payment equal to 10% of the sale value of bagasse due to lack of separate accounts.

Analysis:

The case involved a dispute regarding the appellant's manufacture of sugar and molasses chargeable to Central Excise Duty and the emergence of bagasse as a by-product during the crushing of sugarcane. The department contended that the appellant should pay an amount equal to 10% of the sale value of bagasse due to the lack of separate accounts for inputs used in the production of dutiable final products and the exempted final product, bagasse, as per Rule 6(3) of Cenvat Credit Rules, 2004. The Jurisdictional Assistant Commissioner confirmed the demand, leading to an appeal to the Commissioner (Appeals) where the initial decision was upheld.

The appellant argued that a previous Tribunal judgment favored their position and that the Civil appeal filed by the Department against this judgment was dismissed by the Hon'ble Supreme Court, supporting their stance. The Department, however, defended the impugned order by referring to a Board Circular clarifying the treatment of bagasse as an exempted excisable good and the charge of 10% of the sale value in certain cases. The Tribunal considered both sides' submissions and examined the records.

Upon review, the Tribunal found that it was impractical for the appellant to maintain separate accounts for inputs used in the production of sugar, molasses, and bagasse, given that bagasse emerges as a by-product during the sugarcane crushing process. The Tribunal concluded that the amendment in the Finance Act and the Board's Circular did not alter the circumstances of the case. Additionally, the Tribunal noted the absence of specific details in the show cause notice or the impugned order regarding the use of common Cenvat credit availed inputs in the production process. Therefore, the Tribunal sided with the appellant, setting aside the impugned order and allowing the appeal and stay applications.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the impracticality of maintaining separate accounts for inputs due to the nature of bagasse as a by-product and the lack of clarity in identifying the common inputs used in the production process.