Cenvat credit on bagasse waste: Rule 6(3)(b) held inapplicable where separate input use could not be shown.

Rule 6(3)(b) of the Cenvat Credit Rules, 2004 was considered in relation to bagasse sold in the market on the premise that it was an exempted excisable product. Bagasse was described as a waste product arising at the sugarcane crushing stage for manufacture of sugar and molasses, and the record did not establish which common Cenvat credit inputs were used for bagasse as distinct from the main products. The commentary notes that separate input accounts were not realistically maintainable on these facts and that an earlier tribunal decision had already taken the same view. On that basis, Rule 6(3)(b) was held inapplicable and the demand unsustainable.

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Issues: Whether Rule 6(3)(b) of the Cenvat Credit Rules, 2004 could be invoked to demand 10% of the value of bagasse sold in the market on the premise that bagasse was an exempted excisable product.

Analysis: Bagasse arises as a waste product in the course of crushing sugarcane for the manufacture of sugar and molasses. Since it emerges at the crushing stage, there was no realistic basis to require maintenance of separate accounts for inputs allegedly used for sugar and molasses on one hand and bagasse on the other. The record also did not show which common Cenvat credit availed inputs were used in the manufacture of sugar and molasses and bagasse. The identical issue had already been decided in favour of the assessee in the earlier tribunal decision referred to in the order.

Conclusion: Rule 6(3)(b) was not applicable on these facts and the demand was not sustainable.

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