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2023 (2) TMI 728 - AT - Central ExciseCENVAT Credit - inputs - bagasse/press-mud - excisable goods or exempt goods - demand of amount equal to 6% of Sale value of Bagasse and Press mud, alongwith interest and penalty - HELD THAT - Both the lower authorities have held that since the appellant has availed CENVAT credit on various inputs going into the manufacture of the final products, and bagasse and pressmud arising during the course of manufacture and are exempt, CENVAT credit cannot be allowed. The issue is no more res integra as the question as to whether bagasse is manufactured under the provisions of Section 2(f) of the Central Excise Act, 1944 or otherwise and the CENVAT credit availed on the inputs which are used for the manufacture of sugar has to be denied or otherwise has been settled by the apex Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. (SC) 2015 (10) TMI 566 - SUPREME COURT . Hon ble Apex Court held 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. Appeal allowed - decided in favor of appellant.
Issues:
1. Classification of bagasse and press-mud as excisable products and manufacturing activity involved. 2. Consideration of bagasse and press-mud as final products under CENVAT Credit Rules. 3. Requirement of payment for exempted goods under Rule 6(3) of CENVAT Credit Rules. 4. Use of inputs in the manufacture of dutiable and exempted goods. 5. Liability for penalty under Rule 15(2) of CENVAT Credit Rules. Issue 1: The appeal raised questions regarding the classification of bagasse and press-mud as excisable products and the involvement of manufacturing activity. The lower authorities denied CENVAT credit due to the exemption status of bagasse and press-mud. The issue was resolved by referring to the decision of the Hon'ble Apex Court in DSCL Sugar Ltd. The Court clarified that bagasse, being an agricultural waste and residue, does not qualify as a manufactured product under Section 2(f) of the Central Excise Act, 1944. The absence of a manufacturing process for bagasse precludes the imposition of excise duty. Issue 2: Regarding the consideration of bagasse and press-mud as final products under CENVAT Credit Rules, the judgment highlighted that the deeming provision for marketable goods under Section 2(d) of the Act requires the process to fall within the definition of "manufacture" as per Section 2(f). As bagasse does not meet the criteria of being a manufactured product, the CENVAT credit availed on inputs used for sugar production, including bagasse, was deemed inadmissible. Issue 3: The question of payment for exempted goods under Rule 6(3) of CENVAT Credit Rules was addressed in light of the ruling that bagasse does not attract excise duty due to its classification as agricultural waste. As bagasse was not considered a manufactured product, the application of Rule 6(3) was deemed inappropriate, leading to the conclusion that no duty is payable on bagasse. Issue 4: The issue of using inputs in the manufacture of both dutiable and exempted goods was examined. The judgment emphasized that since bagasse was not considered a manufactured product, the denial of CENVAT credit on inputs used for sugar production, including bagasse and press-mud, was justified. This decision was in line with the apex court's ruling and subsequent cases that affirmed the non-levy of excise duty on bagasse. Issue 5: Regarding the liability for penalty under Rule 15(2) of CENVAT Credit Rules, the appeal was allowed, and the impugned order was set aside following the precedent established by the Hon'ble Apex Court. The judgment reiterated that bagasse, being an agricultural waste, does not qualify as a manufactured product subject to excise duty, thereby absolving the appellant from the penalty imposed. This comprehensive analysis of the judgment addresses all the issues raised in the appeal and provides a detailed understanding of the legal reasoning and implications of the decision.
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