2019 (8) TMI 419 - AT - Central Excise

CENVAT Credit - waste/residue - exempt goods or not - demand of an amount equivalent to 10%/6%/5% on the clearances of bagasse - HELD THAT - The issue decided in the case of M/S BALRAMPUR CHINI MILLS LTD. THROUGH ITS GENERAL MANAGER VERSUS UNION OF INDIA, MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (5) TMI 972 - ALLAHABAD HIGH COURT where it was held that since it is not a manufacture, Rule 6 of Cenvat Credit Rules shall have no application. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is liable to pay an amount equivalent to 10%/6%/5% on the clearances of bagasse.

Analysis:
The appellant, engaged in the manufacture of sugar, generates bagasse as waste during the manufacturing process. The department contends that the bagasse should be considered exempted goods under Rule 6(3) of the Central Excise Rules, necessitating payment equivalent to the value of clearances of bagasse. The appellant argues that the bagasse is not consciously manufactured and, therefore, the Explanation inserted in 2015 under Rule 6 does not apply to bagasse generated as waste during the manufacturing process. The appellant cites the Tribunal's decision in a similar case and a judgment of the Allahabad High Court to support their argument.

The department raised a demand alleging that the appellant is manufacturing bagasse and, as per the Explanation inserted in Rule 6 from 2015, such bagasse cleared on consideration should be treated as exempted goods. The Tribunal referred to a previous case where it was held that products like bagasse do not qualify as manufacturing under the Central Excise Act and, therefore, do not attract excise duty. The Tribunal highlighted that the goods in question are agricultural waste and residue, not a result of any manufacturing process, hence exempt from excise duty. The Tribunal further explained the amendments to Rule 6 and the implications of the inserted Explanation 1 and 2.

The Tribunal concluded that, based on the precedents and legal interpretation, there is no liability for the appellant to pay the demanded duty for the specified periods. The Tribunal's decision was supported by a judgment of the Allahabad High Court, leading to the setting aside of the demand confirmed post-2015. The appeals were allowed with consequential relief, if any, in favor of the appellant.