2014 (7) TMI 108 - AT - Central Excise

Duty demand - Manufacturing of sugar - Baggase as waste or taxable product - Held that - Baggase is only a waste arising in the course of manufacture of sugar and cannot considered as manufactured goods and, therefore, the provisions of Rule 6(3) of Cenvat Credit Rules, 2004 would not be attracted - Following decision of Balrampur Chini Mills Ltd 2013 (1) TMI 525 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Duty demand upheld against the appellant for bagasse arising in the manufacture of sugar.
2. Interpretation of bagasse as an exempted product.
3. Application of Rule 6(3) of the Cenvat Credit Rules, 2004.
4. Consideration of bagasse as excisable goods post the amendment to the Central Excise Act, 1944 in 2008.

Analysis:
The appeal challenged the duty demand of Rs.33,51,750/- imposed on the appellant for bagasse arising in the sugar manufacturing process. The lower appellate authority upheld the duty demand, stating that since common inputs were used in manufacturing both dutiable and exempted products, the appellant was liable to discharge a percentage of the value of the exempted products cleared. The appellant contended that bagasse, being a waste product in sugar manufacturing, should not be considered a final or exempted product, citing previous Tribunal orders and a judgment by the Allahabad High Court. They argued against the need to reverse any credit taken on inputs used in sugar manufacturing. The appellant requested the impugned order be set aside, and the appeal allowed with consequential relief.

The Revenue, represented by the Addl. Commissioner, supported the lower authority's decision, citing an amendment to the Central Excise Act in 2008, which classified bagasse as excisable goods. The Revenue argued that Rule 6(3) of the Cenvat Credit Rules, 2004 would apply if separate records for inputs used in dutiable/exempted products were not maintained. The Revenue urged for upholding the duty demand based on these arguments.

Upon careful consideration, the Tribunal noted previous judgments by the Tribunal and the Allahabad High Court, which established that bagasse is a waste product in sugar manufacturing and not a manufactured good. Consequently, the Tribunal found that Rule 6(3) of the Cenvat Credit Rules, 2004 would not be applicable in this case. The Tribunal highlighted the absence of any contradictory judgments supporting the Revenue's stance. Following the precedent decisions, the Tribunal allowed the appeal with any consequential relief as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the duty demand concerning bagasse in the sugar manufacturing process. The judgment emphasized the classification of bagasse as a waste product and not an exempted final product, thereby negating the application of Rule 6(3) of the Cenvat Credit Rules, 2004 in this context.