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TMI Blog2013 (1) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... ition Nos. 4477 of 2011 (MB), 1069 (MB) of 2012, 1802 of 2012 (MB), 1816 of 2012 (MB), 3923 (MB) of 2011 and 1262 of 2012 (M/B) and list it separately. Heard Sri Bharat Ji Agarwal, Senior Advocate, assisted by Sri Sudeep Kumar and Sri Piyush Agarwal, appearing on behalf of the petitioner and Sri I.H. Farooqui, Assistant Solicitor General of India and Sri Rajesh Singh Chauhan, learned Counsel for the Central Board of Excise & Customs. In all these writ petitions, the petitioners pray for quashing the Circular dated 28.10.2009, issued by the Central Board of Excise and Customs, the Circular dated 3.10.2009 issued by the Central Excise, U.P., Lucknow and demand notice dated 24/27.9.2010 issued by the Joint Commissioner, Customs Central Excise and Service Tax. Since in all the aforesaid writ petitions, the question involved is that whether Bagasse can be subjected to any duty under the Central Excise Act, it being a waste and not a manufactured product, as pronounced by the Hon'ble Supreme Court in the case of Balrampur Chini Mills Ltd. in Civil Appeal No. 2791 of 2005, decided on 21.7.2010, the facts of writ petition No.11791 (MB) of 2010 are given hereunder:- The sugar, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT credit on any input (as defined in section 2(k); (ii) and manufactures such final products which are chargeable to duty and (iii) also manufactures such final products which are exempted goods. Hence, manufacture is referred to both dutiable/excisable goods and exempted goods, which are the final products. Only then, it is necessary for the manufacturer to maintain separate accounts. This fact has been admitted even in the circular of the Chief Commissioner, Central Excise dated 3.10.2009 that bagasse is not a manufactured final product in view of the judgment of the Hon'ble Supreme Court. But the Chief Commissioner, Central Excise has erred in law in holding that because of the explanation added to Section 2 (d) with effect from 13th May, 2008, the judgment of the Supreme Court stands nullified. Since the Circular of Board and that of Chief Commissioner dated 2.1.2010 is binding upon the Assessing Authority, the petitioner has informed the jurisdictional Central Excise Authority that even though Rule 6 is not applicable and the petitioner is not liable for payment of any Central Excise Duty or reversal of 5% of the amount of bagasse sold, still the petitioner has deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or they are exempted from the duty in terms of any exemption notification and if CENVAT Credit has been taken on the inputs which are used for manufacture of dutiable and exempted goods and no separate accounts have been maintained in this regard, then in terms of Rule 6 of Cenvat Credit Rules, 2004, the proportionate credit would be reversed or 5% amount would be paid. Therefore, the bagasse is now (w.e.f. 10.5.2008) an 'exempted excisable goods' and hence the provisions of Rule 6 of the Rules woud apply. While granting interim order on 2.12.2010, a coodinate Bench of this Court has passed the following order:- "Notice on behalf of respondents has been accepted by Sri Rajesh Singh Chauhan, who prays for and is granted two weeks' time to file counter affidavit. Power has also been filed by Sri Alok Kumar Tripathi on behalf of the Union of India. The issue involved in the present case is whether Bagasse can be subjected to any duty under the Central Excise Act, it being a waste and not a manufactured product, as pronounced by the Supreme Court in the case of the petitioners themselves in Civil Appeal No. 2791 of 2005, decided on 21.7.2010. In the case of Commissioner of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner cannot be considered by the assessing authority, in view of the circulars, referred to above, issued by the Board and the Chief Commissioner respectively, which specifically direct for charging such duty, simply because, bagasse has been found to be marketable. Interpreting Rule 6 and in particular sub-rule (2), learned counsel for the petitioner submitted that the aforesaid rule can attract only when the goods are manufactured which are dutiable and exempted, and they are final products, but the instant case is not a case which can be said to be covered under the said rules. Learned counsel for the petitioner relied upon the judgement of the apex court in the case of Union of India vs. Ahmedabad Electricity Co. Ltd and others (2003) 11 SCC 129, in support of his plea that merely because the bagasse is a marketable product, duty cannot be imposed, as in that case, the Supreme Court has considered the duty upon the cinder, which is also a waste and it does not involve any manufacturing activity. Their Lordships, on the plea of maintainability of the writ petition, observed that 'in the facts of the case, the High Court would have been justified in rejecting such an objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or service and take CENVAT credit only in that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:- (i) the manufacturer of goods shall pay an amount equal to five per cent, of value of the exempted goods and the provider of output service shall pay an amount equal to six percen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also been followed in the cases of Central Excise Commissioner v. Mahalakshmi Sugar Mills and Commissioner Central Excise, Meerut versus U. P. State Sugar Corporation and held that the Bagasse and press mud are not final products of the manufacturer. Accordingly, recovery of 8% amount of the waste Bagasse and press mud cleared by the said sugar company was held to be not justified. The Hon'ble Apex Court while dismissing the Civil Appeal No.2791 of 2005 preferred by the department vide judgment and order dated 21.7.2010, upheld the findings recorded by the Tribunal that reversal of 8% under 57 CC is not applicable as 'Bagassee' is not a final product, but it is a waste. It is worthwhile to mention here that in the judgment dated 22.11.2004 of Tribunal, it was specifically referred in para 2 that the appeal filed by the Commissioner, Central Excise in the case of CCE v. M/s Kicha Sugar Co. Limited was dismissed by Hon'ble Supreme Court on 20.2.2004. As held by the Apex Court, bagasse is not a manufactured goods and it is never manufactured, but it only emerges in the process of final product, namely, sugar. bagasse being not a manufactured goods and being a waste, hence Rules 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not make bagasse, which, as stated hereinabove, is an agricultural waste to be a duitable item and the Chief Commissioner vide Circular dated 3.10.2009 nullified the judgment and order dated 21.7.2010 rendered in Civil Appeal No.2791 of 2005. Bagasse is classified under sub-heading 2303 20 00 of Central Excise Tariff Act. In view of the judgment of Apex Court in Civil Appeal No.2791 of 2005, Commissioner of Central Excise v. Balrampur Chini Mills, Gonda, decided on 21.10.2010, the Circular of the Chief Commissioner, Central Excise, Lucknow as well as Circular of Central Board of Excise and Customs are liable to be quashed which is the basis for issuing the demand. In the impugned notice dated 27.9.2010, it has been mentioned that as per Rule 6 of the CENVAT Credit is availed on the inputs which are used in the manufacture of both dutiable and final products, then an amount equal to 10% (upto 6th July, 2009) or 5% (w.e.f. 7.7.2009) of the sale value of exempted final products is required to be paid. Therefore, neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are not liable to duty either by payment or by reversal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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