2019 (2) TMI 1301 - AT - Central Excise

Tribunal upholds decision on excise duty for agricultural waste

C.C.T. Pune-II Versus Chhatrapati SSK Ltd.

C.C.T. Pune-II Versus Chhatrapati SSK Ltd. - TMI Issues involved:Demand of Central Excise duty on exempted goods like Bagasse, pressmud, and composed fertilizer under Rule 6 of the Cenvat Credit Rules, 2004.Detailed Analysis:Issue 1: Demand of Central Excise duty on exempted goodsThe appeal was filed by the Revenue against the order passed by the Commissioner (Appeals-II) Central Tax, Pune, setting aside the demand of Rs. 29,47,984/- with interest and penalty. The issue revolved around the classification of Bagasse, pressmud, and composed fertilizer as excisable goods under the Central Excise Tariff Act 1985, despite being exempted from central excise duty during the period of March 2015 to June 2017. The Revenue argued that the Assessee failed to maintain separate records of inputs used for both exempted and duty-paid goods, as required by Rule 6(2) of the Cenvat Credit Rules, 2004. The Revenue also contended that the Assessee did not pay an amount equal to 6% of the value of the exempted goods, as mandated by Rule 6(3) of the same rules. A show cause notice was issued, leading to a demand of Rs. 56,66,177/- with interest and penalty.Issue 2: Applicability of Rule 6 of Cenvat Credit Rules, 2004The Revenue argued that the exemption under Rule 6(1) did not apply to Bagasse, pressmud, and composed fertilizer, as they were non-excisable goods capable of being sold for consideration. The Revenue's stance was supported by an explanation inserted into Rule 6 in 2015, which included non-excisable goods cleared for consideration under the purview of the rule. However, the Tribunal, citing the decision in DSCL Sugar Ltd., held that Bagasse, pressmud, and composed fertilizer were waste or byproducts, not manufactured goods, and thus not subject to Rule 6. Previous judgments, including the case of M/s Shivratna Udyog Ltd., supported this interpretation, emphasizing that Rule 6(3) did not apply to waste or byproducts generated during manufacturing processes.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the decision to set aside the demand for central excise duty on Bagasse, pressmud, and composed fertilizer. The judgment reaffirmed that Rule 6 of the Cenvat Credit Rules, 2004 did not apply to waste or byproducts, such as those arising during the production of sugar and molasses. The ruling was based on established legal principles and previous judgments, emphasizing the distinction between manufactured goods and agricultural waste in determining the applicability of central excise duty.