2013 (12) TMI 222 - AT - Central Excise

Cenvat credit taken on Input Separate account not maintained Inventory includes dutiable as well as exempted final product - Press mud emerges as waste 10% duty to be paid as per Rule 6(3) of the Cenvat Credit Rules, 2004 Held that - The press mud obtained is nothing but waste from the cane sugar which arises in course of cleaning of the same, that the product is not excisable - The requirement of Rule 6 (2) can be fulfilled only in respect of the final products which a manufacturer wants to manufacture and this requirement cannot be fulfilled in respect of inevitable waste or by product, as when in the manufacture of some final product, some waste or inevitable by-product emerges, the manufacturer, even if he wants to comply with the provisions of Rule 6 (2), cannot do so Following Narmada Gelatines Limited vs. CCE, Bhopal 2008 (11) TMI 75 - CESTAT NEW DELHI and Rallis India Ltd. vs. Union of India 2008 (12) TMI 46 - HIGH COURT BOMBAY - provisions of Rule 6 (2) and 6 (3) would not apply order set aside Decided in favour of Assessee.

Summary

Issues:
Interpretation of Rule 6 (3) of Cenvat Credit Rules, 2004 regarding press mud as waste product in sugar mill.

Analysis:
The case involved a sugar mill appellant availing Cenvat credit on inputs and capital goods used in their final products, including press mud, a waste component arising during juice cleaning. The department demanded payment equal to 10% of press mud value under Rule 6 (3) for not maintaining separate accounts for dutiable and exempted products. The Commissioner (Appeals) upheld the demand but set aside the penalty, leading to the present appeal.

The appellant argued, citing a Tribunal judgment, that press mud, like bagasse, is waste and not excisable, hence Rule 6 (3) doesn't apply. The department contended that press mud, being marketable, falls under excisable goods due to an amended definition in the Central Excise Act. The Tribunal analyzed the nature of press mud, a cane juice impurity arising during cleaning, and the application of Rule 6 (2) requiring separate accounts for dutiable and exempted products. It referenced precedents where waste products weren't subject to Rule 6 (2) and (3) due to their inevitable nature.

The Tribunal highlighted a Madras High Court decision on press mud and spent wash, stating that waste products with inherent characteristics passing to final products aren't subject to Rule 57CC. It emphasized that press mud and spent wash, exempted from duty, combined to form bio-compost marketed by the appellant without using Cenvat inputs. Consequently, the Tribunal set aside the order, allowing the appeal and granting relief to the appellant.