Excise Duty Not Payable On ‘Bagasse’ Which Emerges As A Waste Product During Sugar Crushing: CESTAT
The Chennai CESTAT ruled that bagasse, a byproduct of sugar crushing, is non-excisable since it is not produced through manufacturing. The Tribunal set aside demands for reversing Cenvat credit on bagasse, citing previous rulings that bagasse is a waste product, not subject to excise duty, and exempt from Rule 6 of the Cenvat Credit Rules.
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that excise duty is not payable on the Bagasse emerged as waste product during sugar crushing. The Bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that Bagasse emerged only as a waste product during crushing of sugarcane during the manufacturing process and though marketable, duty could not be imposed on it as there was no manufacturing activity involved. In this case, the assessee/appellant was engaged in the manufacture of Sugar and Molasses and during such process, Bagasse emerged as a bye product at the milling stage which was captively consumed in the co-generation plant for generating electricity which was in turn captively consumed in the sugar plant. The assessee was availing Cenvat credit of duty paid on inputs like lubricating oil, hydrochloric acid and other chemicals and also on inputs services, which were utilised towards payment of duty on Sugar and Molasses. As per the department that the Bagasse, specified under Tariff Head 2203 2000 of Central Excise Tariff Act,1985 (CETA) and chargeable to Nil rate of duty, falls within the scope of definition of exempted goods in terms of Rule 2(d) of CCR. A show cause notice was issued to the assessee under Rule 14 of CCR read with Section 11(A) (1) of the ACT along with applicable interest, besides proposing to impose penalty under Rule 15(1) of CCR read with Section 11AC of the ACT.
The Adjudicating Authority have confirmed the demands proposed in the said SCN’s and imposed equal penalty under Rule 15(1) of CCR. The assessee has challenged the order passed by the Adjudicating Authority before the Tribunal. The assessee contended that Bagasse emerged only as a waste/ intermediary/ bye -product during crushing of sugarcane during the manufacturing process and though marketable, duty could not be imposed on it as there was no manufacturing activity involved and therefore Rules 6(1), 6(2) and 6(3) of CCR were not applicable. The department submitted that the assessee was liable to reverse the Cenvat credit in terms of Rule 6(3) of CCR as Bagasse, being excisable but charged to ‘nil’ rate of duty was also an exempted product arising during the course of manufacture of Sugar. The Tribunal referred to the case of Ponni Sugars (Erode) Limited Vs. Commissioner of Central Excise, Salem in Final Order No. 40391/2023 dated 18.10.2023 [2023 (10) TMI 876 (Tri.-Chennai)] where it was stated that “…….11. In terms of the above Explanation which was introduced with effect from 01.03.2015, the appellant has to reverse the credit or pay 6% of the value of the exempted products in case non-excisable goods are cleared for a consideration. The Board had also issued a Circular in line with the above Explanation. However, the said Circular came to be challenged before the Hon’ble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. (supra) and the same was held to be invalid and quashed. The relevant portion of the said decision of the Hon’ble Allahabad High Court reads as under: – “27. After the aforesaid judgment which has clearly held Bagasse not to be a manufactured product, and therefore Rule 6 of the Cenvat Credit Rules, 2004 shall have no application, Section 6(1) has been amended by inserting the 2 Explanations, which the respondent contends is sufficient to include Bagasse within the fold of Section 6, and further to justify the stand for a reversal of Cenvat Credit Rules, 2004…….” After referring to the above judgment the bench stated that the demands raised cannot sustain and requires to be set aside. In view of the above, the Tribunal allowed the appeal. Case Title: M/s. Sakthi Sugars Ltd. v. Commissioner of GST and Central Excise Case Number: Excise Appeal Nos. 40479 to 40482 of 2015 Counsel for Appellant/ Assessee: M.N. Bharathi Counsel for Respondent/ Department: O.M. Reena
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Source : LiveLaw.in
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