Rule 6 Cenvat Credit does not apply to bagasse waste cleared for consideration under the settled manufacture test.

Bagasse arising incidentally as waste or residue in sugar manufacture is not a product of manufacture under section 2(f) of the Central Excise Act, 1944, and therefore does not qualify as exempted goods for Rule 6 of the Cenvat Credit Rules, 2004. The 2015 Explanation to Rule 6 does not extend the rule to by-products or waste not manufactured or produced through any process directed to their production. Accordingly, clearance of bagasse for consideration does not attract Rule 6 liability, and no amount is payable on such clearance.

---

---

Issues: Whether bagasse arising as waste in the manufacture of sugar could be treated as exempted goods or non-excisable goods cleared for consideration so as to attract liability under Rule 6 of the Cenvat Credit Rules, 2004.

Analysis: The demand rested on the premise that bagasse was manufactured and, after the 2015 Explanation to Rule 6, its clearance for consideration attracted payment under Rule 6. The Tribunal noted that bagasse is only waste or residue arising incidentally in the course of manufacture of sugar and is not itself the result of manufacture within the meaning of section 2(f) of the Central Excise Act, 1944. It further followed the settled position that Rule 6 applies only where exempted goods or final products are manufactured or produced, and that the 2015 Explanation does not extend the rule to by-products or waste generated without any manufacturing activity directed to their production.

Conclusion: Bagasse could not be treated as exempted goods for the purpose of Rule 6, and no amount was payable on its clearance. The demand was unsustainable.

Final Conclusion: The impugned demand was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Waste or residue that is not the product of manufacture cannot be brought within Rule 6 of the Cenvat Credit Rules, 2004 merely because it is cleared for consideration, and the 2015 Explanation does not extend the rule to such non-excisable by-products.

---