Non-excisable bagasse and pressmud clearances do not trigger input credit reversal on exempt goods treatment.

Bagasse and pressmud arising during sugar manufacture were treated as non-excisable products, and the common input credit reversal mechanism did not apply to their clearance. In light of the binding Supreme Court position that such goods are non-excisable, no reversal of 5% or 10% of their value was required on the footing that they were exempted goods. The demand for reversal was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether any amount equivalent to 5% or 10% of the value of bagasse and pressmud cleared by the assessee was required to be reversed on the footing that such goods were exempted goods.

Analysis: Bagasse and pressmud arising in the course of sugar manufacture were treated as non-excisable products. In view of the binding Supreme Court decision holding such goods to be non-excisable, the liability to reverse 5% or 10% of their value did not arise, since the common input credit mechanism was not attracted to waste or non-excisable clearances.

Conclusion: The demand for reversal was unsustainable and was set aside in favour of the assessee.

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