2013 (5) TMI 242 - AT - Central Excise

Clearances of baggase - whether in respect of clearances an amount equal to 10% of the sale value would be required to be paid in terms of the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 - Held that - As decided in Bajaj Hindustan Ltd. Vs. CCE, Meerut-I 2013 (4) TMI 180 - CESTAT NEW DELHI and Indian Potash Ltd. Vs. CCE, Allahabad (2012 (12) TMI 347 - CESTAT, NEW DELHI) the provisions of Rule 6(2) and 6(3) are applicable when some common inputs are used in or in relation to the manufacture of dutiable final products as well as exempted final products and separate account of inventory of such common inputs and input services in respect of which cenvat credit had been availed is not maintained. In the present case SCN does not even mention as to which are the common inputs which are used at the stage of crushing of sugarcane & mentions chemicals viz. Phosphoric Acid, Hydrogen Peroxide, Caustic Soda, Sulphur, etc. but the same are used in the course of processing of the sugar and not at the stage of crushing of sugarcane at which stage the baggase arises.Thus Rule 6(2) and Rule 6(3) is not applicable & impugned order is not sustainable. In favour of assessee.

Summary

Issues:
Whether baggase is to be treated as an exempted good for excise duty purposes during the manufacturing of sugar.

Analysis:
The appellant, a sugar manufacturer, faced a demand for excise duty on baggase, a byproduct of crushing sugarcane, believed to be an excisable product fully exempt from duty. The jurisdictional Asstt. Commissioner confirmed the demand, leading to an appeal. The appellant argued that baggase is an unavoidable waste product, not an excisable good, citing a judgment of the Hon'ble Allahabad High Court. The Departmental Representative defended the demand based on the findings of the Commissioner (Appeals).

The Tribunal deliberated on whether 10% of the sale value of baggase needed to be paid as per Rule 6(3) of the Cenvat Credit Rules, 2004. Referring to previous judgments, the Tribunal found that Rule 6(3)(b) was not applicable in this case. It was noted that the provisions of Rule 6(2) and 6(3) apply when common inputs are used for both dutiable and exempted final products without separate account maintenance. However, the show cause notice did not specify common inputs used at the stage of crushing sugarcane, making Rule 6(2) and 6(3) inapplicable. Consequently, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal.