2022 (1) TMI 197 - AT - Central Excise

Reversal of CENVAT Credit - input - Baggase - exempt goods - manufacture of taxable as well as exempt goods - non-maintenance of separate account for manufacturing of exempted as well as dutiable goods - demand to pay 5% of the value exempted goods interms of rule 6(3) of CENVAT rules 2004 - HELD THAT - The issue has been settled by the Hon ble apex court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT where Apex Court has held that in the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. As the Hon ble apex court has held that Rule 6 of cenvat credit rules, 2004 is not applicable to the facts of the case. In that circumstances, no demand under rule 6(3) of cenvat credit rules 2004 is sustainable against the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant is liable to pay 5% of the value of exempted goods?
- Applicability of Rule 6 of cenvat credit rules, 2004.

Analysis:

Issue 1: Liability to pay 5% of the value of exempted goods
The appellant, a manufacturer of Sugar, Molasses, and Ethanol, faced a demand confirmed at 5% of the value of exempted goods, specifically "baggase." The appellant procured inputs and availed cenvat credit during manufacturing. The dispute arose as "baggase" was classified as exempted goods with a duty liability of Nil. The appellant was alleged to be liable under Rule 6(3) of cenvat rules 2004 for not maintaining separate accounts for exempted and dutiable goods. The issue was whether the appellant is liable to pay 5% of the value of "baggase."

Analysis of Judgment:
The Hon'ble apex court's decision in Union of India Vs. DSCL SUGAR LTD 2015 clarified that certain goods should be deemed marketable and excisable only if they fall within the definition of "manufacture" as per Section 2(f) of the Act. The amended Section 2(f) broadened the scope of "manufacture" to include specific processes. In this case, it was crucial to determine if any process related to "baggase" was specified in the Section or Chapter notices of the First Schedule. As "baggase" was agricultural waste without undergoing any specific process, it did not fall under the definition of "manufacture." Therefore, no excise duty could be levied on it.

Issue 2: Applicability of Rule 6 of cenvat credit rules, 2004
The Hon'ble apex court's ruling established that Rule 6 of cenvat credit rules, 2004 was not applicable to the case. Consequently, any demand under Rule 6(3) of cenvat credit rules 2004 against the appellant was deemed unsustainable.

Conclusion:
The impugned order was deemed without merit and set aside, allowing the appeal with any consequential relief. The judgment clarified the non-applicability of Rule 6 in the case and the absence of a specified process for "baggase" to be considered excisable goods.