2016 (12) TMI 140 - AT - Central Excise

Demand - failure to pay duty on exempted product i.e. pressmud, while availing CENVAT credit on inputs to be utilised for discharging duty liability on sugar and molasses - Held that - in Sharad SSK Ltd v. Commissioner of Central Excise, Kolhapur 2012 (8) TMI 922 - CESTAT MUMBAI , the Tribunal held that bagasse, pressmud and bio-compost generated during the manufacture of sugar are by-product and waste which are not liable to be treated as excisable goods. Though appeal of Revenue against this decision led to framing of substantial question of law on the inclusion of bagasse, press mud, etc among exempt goods after the amendment to section 2(d) of Central Excise Act, 1944 by the Hon ble High Court of Bombay, attention was drawn to the decision of the Hon ble Supreme Court in Union of India v. DSCL Ltd 2015 (10) TMI 566 - SUPREME COURT which dealt with bagasse as a waste product of sugar industry after the amendment in section 2(d) of Central Excise Act, 1944 with effect from 10th May 2008. Respectfully following the decision of the Hon ble Supreme Court which is equally applicable to pressmud , the appeal is allowed.

Summary

Issues:
Challenge to order confirming demand, interest, and penalty under Central Excise Act for failure to pay duty on exempted product while availing CENVAT credit.

Analysis:
The appellant challenged the order confirming a demand of Rs. 1,08,945 along with interest and penalty under section 11AC of the Central Excise Act for not paying duty on an exempted product, pressmud, while utilizing CENVAT credit on inputs for discharging duty liability on sugar and molasses. The impugned order was upheld by the lower authority, leading to the appeal before the Tribunal.

The Tribunal referred to the nature of pressmud as described in a previous decision and highlighted that pressmud and waste water, when converted into bio-compost, are not excisable goods. The Tribunal also cited a case where bagasse, pressmud, and bio-compost generated during sugar manufacture were considered by-products and waste, not subject to excise duty. The Tribunal emphasized that for a process to amount to manufacture under the Central Excise Act, it must fall within the definition provided, including incidental processes and those specified in the tariff schedule.

The Revenue attempted to classify the case under a specific clause related to processes specified in the tariff schedule, but the Tribunal found that such specification was lacking in the present case concerning Bagasse. As Bagasse was deemed to be agricultural waste and not a result of any process, it did not fall within the definition of manufacture under Section 2(f) of the Act. Consequently, without meeting the criteria for manufacture, no excise duty could be levied, and Rule 6 of the CENVAT Rules, 2004, would not apply.

Based on the decision of the Hon'ble Supreme Court regarding similar matters, the Tribunal allowed the appeal, setting aside the impugned order. The Tribunal concluded that pressmud, akin to Bagasse, did not qualify as a manufactured product, thus absolving the appellant from the duty liability and penalties imposed.