2021 (6) TMI 831 - AT - Central Excise

Tribunal rules in favor of appellant, exempting bagasse from excise duty under CENVAT Credit Rules

M/s Dwarkadhish Sakkar Karkhana Ltd. Versus Commissioner of Central Excise, Nashik

The Tribunal ruled in favor of the appellant, setting aside the demand notice for recovery of an amount related to the discharge of 10% or 5% of the price ... CENVAT Credit - waste/residue - Bagasse - process in respect of Bagasse taking place or not - period from May, 2008 to June, 2010 - HELD THAT:- This issue has been considered by the Hon'ble Supreme Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [2015 (10) TMI 566 - SUPREME COURT] where it was held that Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application as rightly held by the High Court, since Bagasse is held not to be result of any manufacture. There are no justification in sustaining the impugned order - appeal allowed - decided in favor of appellant. Issues:1. Interpretation of Rule 6(1) of CENVAT Credit Rules, 2004 regarding the discharge of 10% or 5% of the price of bagasse generated during the manufacture of sugar.Detailed Analysis:The appeal in question was filed against an Order-in-Appeal passed by the Commissioner of Central Excise & Customs, Nashik, regarding the appellant's availing of CENVAT Credit on inputs, capital goods, and input services used in manufacturing sugar. The issue revolved around the demand notice issued to recover an amount for the period from May 2008 to June 2010, alleging contravention of Rule 6(1) of the CENVAT Credit Rules. The demand was confirmed with interest and penalty, leading to the appellant filing an appeal before the Commissioner, which was rejected, prompting the present appeal (paragraph 2).The appellant contended that the amendment to the definition of excisable goods under the Central Excise Act in 2008 did not change the principle of law regarding the discharge of 5% or 10% of the price of bagasse generated during sugar manufacture. They cited the Supreme Court judgment in Union of India Vs. DSCL Sugar Ltd., which clarified this issue. The appellant argued that the demand confirmed against them was not legally sustainable (paragraph 3).The Revenue supported the findings of the Commissioner (Appeals) (paragraph 4). After hearing both sides and examining the records, the Tribunal considered the central issue of whether 10% or 5% of the price of bagasse generated during sugar manufacture was chargeable for the period in question. The Tribunal referred to the Supreme Court's judgment in the DSCL case, which discussed the amended definition of excisable goods and the concept of 'manufacture' under the Central Excise Act (paragraph 6).The Tribunal highlighted the importance of the deeming fiction introduced by the amendment, which treated certain goods as marketable and excisable. However, it emphasized that for this fiction to apply, the process must fall within the definition of 'manufacture' as specified in the Act. In the absence of a specified process for bagasse in the relevant schedules, the deeming provision could not be invoked. As bagasse was deemed to be agricultural waste and residue without undergoing a specific process, it did not qualify as excisable goods under the Act. Therefore, Rule 6 of the CENVAT Credit Rules, 2004, did not apply, and there was no basis for imposing excise duty on bagasse (paragraph 10).Based on this analysis, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, as per the law (paragraph 7).