Tribunal Rules: No Cenvat Credit Reversal for Non-Excisable By-Products; Appellant Wins Appeal.

The Tribunal allowed the appeal filed by the Appellant, a manufacturer of sugar and molasses, against the reversal of Cenvat credit for by-products cleared without payment of duty. The Tribunal, referencing Supreme Court decisions and Board Circulars, concluded that reversal of Cenvat credit is not required for non-excisable by-products like Bagasse. Consequently, the Tribunal set aside the demands confirmed in the impugned order, granting the Appellant consequential relief as per law.

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Issues:
The appeal against the Order-in-Appeal dated 04.01.2019 passed by the Commissioner (Appeals) of Customs, Central GST & Central Excise, Patna regarding the reversal of proportionate credit attributable to exempted goods as per Rule 6 of the Cenvat Credit Rules, 2004.

Details of the Judgment:

Issue 1: Reversal of Cenvat Credit for by-products cleared without payment of duty
The Appellant, a manufacturer of sugar & molasses, cleared by-products like press mud and bio compost without payment of duty. The Department alleged that the Appellant manufactured both dutiable and exempted products, thus liable to reverse the Cenvat credit proportional to the value of exempted goods. The Appellant cited legal precedents, including the decision of the Hon'ble Supreme Court in Union of India Vs. DSCL Sugar Ltd., supported by subsequent High Court and Supreme Court decisions and a relevant Circular issued by the Board. The Tribunal noted that the issue has been settled by the Supreme Court, holding that reversal of Cenvat Credit is not required when by-products like Bagasse are cleared without duty payment. The Tribunal also referred to the Board's Circular clarifying the treatment of such by-products as exempted goods for credit reversal purposes.

Issue 2: Legal standing of Circulars and subsequent Supreme Court judgments
The Tribunal considered the legal standing of Circulars and subsequent Supreme Court judgments on the issue of by-products like Bagasse. It highlighted the Circular dated 25-4-2016, which was later challenged in the case of Union of India v. M/s. Indian Sucrose Limited. The Supreme Court, in its judgment dated 4-3-2022, reiterated that Bagasse is non-excisable and the CENVAT Credit Rules do not apply to it. The Tribunal, following the decisions of the Supreme Court and the relevant Circulars, concluded that the demands confirmed in the impugned order were not sustainable and therefore set aside the same.

Conclusion:
Based on the legal precedents, Supreme Court decisions, and the Board's Circulars, the Tribunal allowed the appeal filed by the Appellant, providing consequential relief as per law.

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