Tribunal Exempts Sugar Mill from Duty Demand on By-Products

The Tribunal set aside the duty demand, interest, and penalty imposed on M/s. Sahakar Shiromani Vasantrao Kale Sahakari Sakhar Karkhana Ltd. for not maintaining separate records for the consumption of inputs/input services. Relying on a recent apex court judgment, the Tribunal ruled that Rule 6(3) of the CENVAT Credit Rules 2004 does not apply to by-products like bagasse arising during manufacturing, exempting the appellant from payment for such by-products. The appeal was allowed, emphasizing the legal position clarified by the apex court, resulting in a favorable outcome for the appellant.

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Issues:
Duty demand confirmation due to lack of separate records for consumption of inputs/input services leading to penalty imposition.

Analysis:
The appeal was filed against Order-in-Original No. 04/CEX/2011, confirming a duty demand of Rs. 52,42,230 against the appellant for not maintaining separate records for the consumption of inputs/input services used in manufacturing dutiable and exempted products. The appellant, M/s. Sahakar Shiromani Vasantrao Kale Sahakari Sakhar Karkhana Ltd., challenged the duty demand, interest, and penalty imposed by the Commissioner of Central Excise, Pune - III Commissionerate.

The appellant did not appear during the proceedings but submitted written contentions citing favorable decisions from the Tribunal and the High Court. The Revenue's representative reiterated the adjudicating authority's findings regarding the duty demand and penalty.

The Tribunal examined the case, focusing on the demand made during the manufacture of sugar concerning bagasse, a waste/by-product. Referring to a recent judgment by the apex court in the case of Hindustan Zinc Ltd., the Tribunal highlighted that Rule 6(3) of the CENVAT Credit Rules 2004 does not apply to by-products arising during manufacturing. Consequently, the reversal of credit or payment of a sum for exempted by-products is not required.

Based on the legal position clarified by the apex court, the Tribunal concluded that the impugned order was not legally sustainable. Consequently, the Tribunal set aside the Order-in-Original, allowing the appeal with any necessary consequential relief as per the law. The judgment emphasized the exemption of payment for by-products as per the apex court's ruling, leading to the favorable decision for the appellant.

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