2013 (12) TMI 454 - AT - Central Excise

Duty demand under Rule 6(3)(b) of cenvat credit Rules, 2001 Brown sugar emerged as residue in manufacture of sugar Held that - Brown Sugar is not an agriculture waste (like Baggase and press mud) or a waste of an input after its use like HCL but a residue of manufactured product viz sugar not meeting the specification of standard sugar and is brown in colour - This is reprocessed and converted into normal sugar it cannot be considered as waste or unmanufactured product, it is residue of manufactured product and can be reprocessed to manufactured product viz. sugar 8% amount is correctly demanded under Rule 6 (3) (b) of Cenvat Credit Rule, 2001. Brown Sugar is a residue and also sugar but not meeting the specifications of standard white sugar and requires reprocessing to convert into standard sugar - There is no dispute that inputs have been used in the manufacture of such sugar - Brown Sugar is a residue of a manufactured product and cannot be considered as waste like Baggasse or Mother Liquor - Classification of the product would not alter the position about the applicability of Rule 6 (3)(b) of Cenvat Credit Rules, 2001 Decided against Assessee.

Summary

Issues:
- Availing Cenvat Credit on inputs used in the manufacture of brown sugar without maintaining separate accounts as required by Rule 6(2) of Cenvat Credit Rules, 2001.
- Demand of 8% of the sale price of brown sugar under Rule 6(3)(b) of Cenvat Credit Rules, 2001.

Analysis:

Issue 1: Availing Cenvat Credit without maintaining separate accounts
The appellants were engaged in sugar manufacturing and availing Cenvat Credit on inputs without maintaining separate accounts for the manufacture of brown sugar. The Department demanded Rs.93,484 as 8% of the sale price of brown sugar under Rule 6(3)(b) of Cenvat Credit Rules, 2001, due to the lack of separate accounts. The appellants argued that brown sugar is a waste product, non-excisable, and beyond the scope of Rule 6(2) of the Rules. The advocate cited case laws to support this argument, comparing brown sugar to bagasse, which is considered waste. However, the Tribunal noted that brown sugar is a residue of the manufactured product sugar, not meeting standard specifications, and can be reprocessed into normal sugar. Therefore, it cannot be considered waste or unmanufactured. The Tribunal held that the demand under Rule 6(3)(b) was justified due to the lack of separate accounts.

Issue 2: Demand of 8% of the sale price of brown sugar
The Department argued that brown sugar is a manufactured product, unlike agricultural waste like bagasse. The Tribunal acknowledged that brown sugar is not agricultural waste but a residue of the manufactured product sugar. It noted that previous case laws cited by the appellants regarding waste products like bagasse and mother liquor were not directly applicable to the case of brown sugar. The Tribunal emphasized that brown sugar, although a residue, is still a product that requires reprocessing to meet standard sugar specifications. Therefore, the demand of 8% of the sale price under Rule 6(3)(b) was upheld. The Tribunal dismissed the appeal, emphasizing that brown sugar is a residue of a manufactured product and not waste, hence subject to the Cenvat Credit Rules.

In conclusion, the Tribunal upheld the Department's demand for 8% of the sale price of brown sugar under Rule 6(3)(b) of the Cenvat Credit Rules, 2001, due to the appellants' failure to maintain separate accounts for inputs used in the manufacture of brown sugar. The judgment clarified that brown sugar, although a residue, is not considered waste but a product that can be reprocessed into standard sugar, making it subject to the Cenvat Credit Rules.