Brown sugar as manufacturing residue attracts common input credit reversal under Rule 6, with the demand upheld.

Brown sugar arising during manufacture of sugar was treated as a residue of the final product, not as agricultural waste or a waste of input after use. Because common inputs were used in its manufacture and it could be reprocessed into standard sugar, it was not excluded from Rule 6 treatment merely because it was cleared at nil rate or classified under chapter heading 23.01. The product was therefore covered by Rule 6(2) of the Cenvat Credit Rules, 2001, and the requirement to pay 8% of its sale price under Rule 6(3)(b) was upheld.

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Issues: Whether brown sugar, cleared at nil rate, was a waste or residue of manufacture so as to fall outside Rule 6(2) of the Cenvat Credit Rules, 2001, and whether 8% of its sale price was therefore recoverable under Rule 6(3)(b) of the Cenvat Credit Rules, 2001.

Analysis: Brown sugar was found to be a residue of the manufactured final product sugar, not an agricultural waste like bagasse or press mud and not a waste of an input after use. It could be reprocessed into standard sugar, and the use of common inputs in its manufacture was undisputed. The classification of the product under chapter heading 23.01 did not change its character for the purpose of Rule 6, because the material in question was not a mere waste or unmanufactured product but a product arising from manufacture.

Conclusion: Brown sugar was held to be covered by Rule 6(2) of the Cenvat Credit Rules, 2001, and the demand of 8% under Rule 6(3)(b) of the Cenvat Credit Rules, 2001 was upheld.

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