2013 (5) TMI 64 - AT - Central Excise

Manufacture of goods - Bagasse arise - Appellant having not maintained separate accounts for the bagasse cleared by them and availed Cenvat credit on common inputs, capital goods and common input services Held that The issue is no more res-integra as Hon ble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. & Ors. Vs. UOI 2013 (1) TMI 525 has settled the issue as is in the case before us and accordingly, we find that the impugned orders are not sustainable and are liable to be set aside and the appeals are allowed with consequential relief, if any.

Summary

Issues:
Discharge of amount equal to 10% or 5% of total value of bagasse cleared by appellant due to availing cenvat credit without maintaining separate accounts.

Analysis:
The appeals revolve around the issue of discharging an amount equivalent to a percentage of the total value of bagasse cleared by the appellant, who had availed cenvat credit without maintaining separate accounts. The central point of contention is whether bagasse, classified as an exempted product, should be subject to the rules requiring payment based on the value of manufactured goods. The judgment references the decision of the Hon'ble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. & Ors. Vs. UOI, where it was established that bagasse is considered a residue or waste rather than a manufactured final product. This distinction is crucial in determining the applicability of Rule 6 (3) concerning the liability to pay a certain percentage of the value of manufactured goods.

The judgment further delves into the legal interpretation of bagasse as waste generated during the process of manufacturing sugar, emphasizing that it does not qualify as a final product exempt from duty. Various legal precedents, including decisions by the Apex Court and Tribunal, support the classification of bagasse as waste and not a marketable final product. The analysis highlights that the marketability of bagasse does not alter its status as waste, reinforcing the argument against imposing duty on it under Rule 6 of the CENVAT Credit Rules.

Moreover, the judgment draws parallels between Rule 6 of the CENVAT Credit Rules and Rule 57CC of the Central Excise Rules, underscoring that these rules do not apply to waste that is not considered a final product. Legal references to cases such as Commissioner v. Gas Authority of India Ltd. further strengthen the position that benefits like Modvat credit cannot be denied based on the non-final product status. The judgment concludes that bagasse, despite being a marketable agricultural waste, does not undergo manufacturing activities to warrant duty imposition, even with the amended definition of 'goods' under the Central Excise Act.

In light of the settled legal position established by the Hon'ble High Court of Allahabad, the impugned orders are deemed unsustainable, leading to the allowance of the appeals with consequential relief. The judgment emphasizes the need to set aside the orders and quash the circulars and demand notices associated with the disputed duty on bagasse, ensuring the return of deposited amounts to the petitioners. The comprehensive analysis showcases the legal intricacies surrounding the classification of bagasse and the implications of rules governing the payment of duty on manufactured goods.