2012 (8) TMI 837 - AT - Central Excise

Tribunal Overturns Demand for Payment Based on Amendment, Requires Separate Accounts for Dutiable and Exempted Final Products

The Tribunal ruled in favor of the appellant, holding that the amendment in the Finance Act and Board Circular did not change the requirement to maintain ... Duty demand - appellant have not maintained separate account and inventory of the inputs used in or in relation to manufacture of dutiable final products - Held that:- bagasse emerges in course of crushing of the sugarcane. It may be noted that crushing of sugarcane is necessary to extract canesugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane. Therefore, by no stretch of imagination it can be said that the assessee possibly could have maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse. Thus, in our considered view, the amendment in Finance Act, cited by Shri Negi, AR and the Board’s Circular would not make any difference in the facts and circumstances of the case. Moreover, neither the show cause notice nor the impugned order-in-appeal mentions as to which common Cenvat credit availed inputs have been used in manufacture of sugar and molasses (dutiable final product) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any inputs — chemicals etc. having been used at that stage - Decided in favour of assessee. Issues:1. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 regarding maintaining separate accounts for dutiable and exempted final products.2. Applicability of the amendment in the Finance Act and Board Circular No. 904/24/2009-CX on the treatment of bagasse as an exempted excisable good.3. Validity of the demand for payment equal to 8% of the sale value of bagasse due to lack of separate accounts.Analysis:1. The appellant, engaged in manufacturing sugar and molasses chargeable to Central Excise Duty, availed Cenvat credit for excise duty paid on inputs. The issue arose when the department demanded payment equal to 8% of the sale value of bagasse due to the appellant's failure to maintain separate accounts for inputs used in manufacturing dutiable final products (sugar and molasses) and the exempted final product (bagasse) as per Rule 6(3) of Cenvat Credit Rules, 2004.2. The Tribunal considered the appellant's argument citing a previous judgment in favor of a similar case and the dismissal of the Department's appeal by the Hon'ble Supreme Court. The Department defended its position by referring to the amendment in the Finance Act and a Board Circular treating bagasse as an exempted excisable good, subject to a charge of 5% of the sale value if Cenvat credit on common inputs was taken. However, the Tribunal found that maintaining separate accounts for inputs used in producing sugar, molasses, and bagasse was impractical due to the nature of bagasse being a by-product of sugarcane crushing.3. The Tribunal concluded that the amendment in the Finance Act and the Board Circular did not alter the circumstances of the case. It noted that the show cause notice and the impugned order did not specify which common Cenvat credit availed inputs were used for sugar, molasses, and bagasse production. As bagasse emerges during sugarcane crushing, no separate inputs like chemicals are used at that stage. Therefore, the Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal and stay application.This detailed analysis of the judgment highlights the interpretation of relevant rules, the impact of legal precedents, and the application of legislative amendments in determining the liability of the appellant in the case.