Bagasse as waste product: Rule 6(3) Cenvat Credit demand unsustainable absent proof of common input use.

Bagasse cleared without payment of duty was held not to attract a demand under Rule 6(3) of the Cenvat Credit Rules, 2004 where it arose only as a waste product in sugar manufacture. The Tribunal reasoned that, in such circumstances, there was no practical basis to require separate maintenance of accounts for inputs allegedly used in its emergence, and no evidence showed that common Cenvat credit availed inputs were used for bagasse production. On that footing, the demand was found unsustainable and the assessee's appeal succeeded.

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Issues: Whether an amount under Rule 6(3) of the Cenvat Credit Rules, 2004 was demandable in respect of bagasse cleared without payment of duty.

Analysis: Bagasse arises as a waste product during crushing of sugarcane for manufacture of sugar and molasses. The Tribunal relied on its earlier view that, in such circumstances, there is no practical basis to require separate maintenance of accounts for inputs allegedly used in the emergence of bagasse, and no showing was made that common Cenvat credit availed inputs were used for its production. The demand under Rule 6(3) in respect of such clearances was therefore not sustainable.

Conclusion: The demand under Rule 6(3) was held to be unsustainable and the appeal succeeded in favour of the assessee.

Ratio Decidendi: Where bagasse emerges only as a waste product in the course of manufacture and no common input use for its production is established, no demand under Rule 6(3) of the Cenvat Credit Rules, 2004 can be sustained.

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