Writ maintainability and CENVAT credit on bagasse-based electricity: Rule 6 held inapplicable where no exempted goods issue arose.

Alternative remedy did not bar writ jurisdiction where the impugned adjudication was said to disregard binding legal principles and precedent, and the petitions were therefore maintainable. On the merits, bagasse was treated as waste arising in sugar manufacture, and electricity generated from it was not regarded as excisable goods or exempted goods for Rule 6 of the CENVAT Credit Rules, 2004. As common inputs for dutiable and exempted final products were not shown to have been used in the manner required, reversal of CENVAT credit and the related duty demand could not be sustained. The impugned orders and show-cause notice were quashed.

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Issues: (i) Whether the writ petitions were maintainable despite the availability of an alternative statutory appeal under the Central Excise Act, 1944. (ii) Whether electrical energy generated from bagasse and sold outside the factory was excisable or exempted goods so as to attract reversal of CENVAT credit under Rule 6 of the CENVAT Credit Rules, 2004.

Issue (i): Whether the writ petitions were maintainable despite the availability of an alternative statutory appeal under the Central Excise Act, 1944.

Analysis: The availability of an alternative remedy does not bar the exercise of writ jurisdiction where the facts disclose illegality, arbitrariness, or failure to follow binding legal principles. The impugned adjudication was challenged as having ignored the governing legal position and binding precedent, and relegating the petitioners to appeal was found to be an ineffectual course in the circumstances.

Conclusion: The preliminary objection based on alternative remedy was rejected and the writ petitions were held maintainable.

Issue (ii): Whether electrical energy generated from bagasse and sold outside the factory was excisable or exempted goods so as to attract reversal of CENVAT credit under Rule 6 of the CENVAT Credit Rules, 2004.

Analysis: Rule 6 applies only where a manufacturer uses common inputs in the manufacture of both dutiable final products and exempted final products. Bagasse was treated as waste arising in the process of sugar manufacture and not as a manufactured final product. Electrical energy generated from bagasse was held not to satisfy the requirements of excisable goods under the Central Excise Act, 1944, nor to fall within the category of exempted goods for Rule 6 purposes. Since the petitioners did not avail CENVAT credit on inputs or input services relatable to generation of electricity in the manner alleged by the department, the demand for duty or credit reversal could not stand.

Conclusion: Electrical energy generated from bagasse and sold to the power corporation was held not liable to excise duty, and Rule 6 of the CENVAT Credit Rules, 2004 was held inapplicable.

Final Conclusion: The impugned orders and the show-cause notice were quashed, and the authorities were restrained from realizing excise duty on the electrical energy sold outside.

Ratio Decidendi: Rule 6 of the CENVAT Credit Rules, 2004 is attracted only when common inputs are used in the manufacture of both dutiable and exempted final products, and electricity generated from bagasse in the facts of the case was not excisable or exempted goods for that purpose.

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