2016 (8) TMI 1013 - AT - Central Excise

Payment of 5% or 10% of the value of exempted goods, i.e., bagasse and pressmud - cleared without payment of duty - Held that - the issue is covered by the judgement of the Hon ble Apex Court in the case of UOI Vs. DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT wherein it was held that bagasse is not excisable, there being no manufacturing process. Bagasse and pressmud is arising during the course of manufacturing of sugar is undisputed. Therefore, the impugned order is unsustainable. - Decided in favour of appellant

Summary

Issues:
- Payment of 5% or 10% of the value of exempted goods, i.e., bagasse and pressmud cleared by the appellant.
- Interpretation of bagasse as marketable product and exempted goods under Section 2(d) of the Central Excise Act.
- Applicability of Circular No.1027/15/2016-CX regarding by-products and wastes arising during manufacturing.
- Impact of the explanation added to sub-rule (1) of Rule 6 of the Cenvat Credit Rules on the case.

Analysis:
1. The issue in this case revolves around the requirement for the appellant to pay 5% or 10% of the value of bagasse and pressmud cleared without duty payment. The appellant availed Cenvat Credit on common inputs, leading the Revenue to argue for the payment. However, the judgment refers to the Supreme Court's decision in UOI Vs. DSCL Sugar Ltd., which established that bagasse is not excisable. This ruling, along with Circular No.1027/15/2016-CX, supports that by-products during manufacturing are not excisable goods.

2. The learned DR highlighted an explanation added to sub-rule (1) of Rule 6 of the Cenvat Credit Rules, stating that exempted goods include non-excisable goods cleared for a consideration. However, the judgment questions the retrospective nature of this explanation. The absence of clarity on the retrospective application weakens the Revenue's argument, as the explanation does not specify its temporal scope.

3. Considering the precedent set by the Hon'ble Apex Court and the lack of clarity in the added explanation to the Cenvat Credit Rules, the judgment concludes that the impugned order is unsustainable. As a result, the order is set aside, and the appeal is allowed in favor of the appellant. The decision is based on the legal interpretation of bagasse as a non-excisable by-product and the absence of clear retrospective application in the relevant rule amendment.

This detailed analysis of the judgment highlights the legal reasoning behind the decision, emphasizing the interpretation of statutory provisions, judicial precedents, and administrative circulars in resolving the issues raised in the case.