2019 (12) TMI 421 - AT - Central Excise

CENVAT Credit - waste/residue/by-product/ refuse - pressmud - exempt goods - non-maintenance of separate records - whether after amendment in the year 2015, Rule 6 of Cenvat Credit Rules, 2004 is applicable in case of removal of pressmud generated during the manufacturing of sugar as the assessee is not maintaining separate accounts? - January, 2016 to March, 2017. HELD THAT - There is no manufacturing process involved in pressmud s production. Bagasse, pressmud and composed fertilizer is not goods but merely a waste or byproduct therefore Rule 6 of the Cenvat Rules shall have no application in the present case and they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 1.3.2015 in Rule 6 CCR has wrongly been relied upon by both the authorities below in coming to the conclusion that the assessee is liable to reverse the Cenvat Credit availed by them - As per Rule 6(1) ibid read with Explanation-1, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under Rule 6(1) and those goods which were not manufactured, like pressmud in these appeals, will not be covered under Rule 6 despite being non-excisable goods because pressmud is not being manufactured in the factory but it emerged as agricultural waste or residue. It is seen that Rule 6(1) was amended in order to include the inputs used in relation to the manufacture of exempted goods. As such it can be seen that the same relates to the manufacture and it can safely be concluded that there has to be a manufacturing activity for invoking the aforesaid Rule - bagasse/pressmud which emerges as a waste/by-product, falls outside the scope of Rule 6 ibid. Even after amendment to Rule 6 ibid, pressmud which emerges as a waste/ by product, falls outside the scope of the said Rule - Appeal of assessee allowed.

Summary

Issues:
Whether Rule 6 of Cenvat Credit Rules, 2004 is applicable in case of removal of pressmud generated during the manufacturing of sugar as the assessee is not maintaining separate accounts?

Analysis:
The appellate tribunal heard an appeal filed by the assessee against the order passed by the Commissioner (Appeals-I), Central Tax, Pune. The issue to be decided was whether Rule 6 of Cenvat Credit Rules, 2004 is applicable in the case of removal of pressmud generated during the manufacturing of sugar, considering the assessee's lack of separate accounts maintenance. The facts revealed that the assessee, engaged in the manufacture of excisable goods like sugar and molasses, was availing Cenvat Credit but not maintaining separate accounts for exempted and duty-paid goods. The Revenue contended that pressmud, a byproduct, was exempt from excise duty. The Adjudicating Authority confirmed a demand against the assessee, which led to the appeal. The tribunal considered various legal precedents cited by the appellant's counsel to support the argument that Cenvat credit reversal was not required for waste or byproducts generated during manufacturing.

The tribunal noted that a previous order by the tribunal in the appellant's case and a Supreme Court ruling established that pressmud is agricultural waste and not a result of any manufacturing process. The tribunal emphasized that pressmud, bagasse, and composed fertilizer were not considered goods but waste or byproducts. The amendment to Rule 6 CCR in 2015 was deemed irrelevant in this context. The tribunal analyzed Rule 6(1) and its application to non-excisable goods and concluded that pressmud, being agricultural waste, did not fall under Rule 6. The tribunal highlighted that manufacturing activity was a prerequisite for invoking Rule 6. Referring to consistent tribunal decisions, the tribunal affirmed that waste/by-products like bagasse and pressmud were outside the scope of Rule 6.

In conclusion, the tribunal held that even after the amendment to Rule 6, pressmud as a waste/byproduct remained outside the rule's scope. Consequently, the appeal filed by the assessee was allowed, granting any consequential relief deemed necessary.