Revenue loses appeal on CENVAT credit recovery for bagasse and press mud under Rule 6

CESTAT Allahabad dismissed revenue's appeal regarding CENVAT credit recovery on bagasse and press mud for December 2016 to June 2017. Following SC precedent in Union of India v. DSCL Sugar Ltd., the tribunal held that bagasse constitutes agricultural waste and residue, not a manufactured product requiring any specified process. Since bagasse does not fall within the definition of manufacture under Section 2(f) of the Act and no excise duty applies, Rule 6 of CENVAT Credit Rules, 2004 cannot be invoked for credit recovery.

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Issues Involved:
1. Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to Bagasse and Press Mud.
2. Validity of the Circular No. 1027/15/2016-CX dated 25.04.2016.
3. Relevance of the Supreme Court judgment in DSCL Sugars and Allahabad High Court judgment in Balrampur Chini Mills.

Summary:

Issue 1: Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to Bagasse and Press Mud

The revenue issued show cause notices to the respondent for the demand and recovery of amounts payable u/r 6 of the CENVAT Credit Rules, 2004, for the clearances/sale of Bagasse and Press Mud for the period December 2016 to June 2017. The respondent did not maintain separate records/accounts for inputs and input services used in the manufacture of exempted goods, namely Bagasse and Press Mud, and did not pay the required amount or reverse proportionate credit as per Rule 6(3).

Issue 2: Validity of the Circular No. 1027/15/2016-CX dated 25.04.2016

The revenue argued that the Commissioner (Appeals) erred by not considering the amendment in Rule 6 of the CENVAT Credit Rules, 2004, effective from 01.03.2015, which included non-excisable goods cleared for consideration as exempted goods. The Circular No. 1027/15/2016-CX clarified that Bagasse, being a non-excisable good cleared for consideration, should be treated like exempted goods for the purpose of reversal of credit.

Issue 3: Relevance of the Supreme Court judgment in DSCL Sugars and Allahabad High Court judgment in Balrampur Chini Mills

The Commissioner (Appeals) relied on the Supreme Court judgment in DSCL Sugars [2015(322)ELT769 (SC)], which held that Bagasse is an agricultural waste and not a manufactured product, thus Rule 6 of the CENVAT Credit Rules, 2004, does not apply. The Allahabad High Court in Balrampur Chini Mills [2019(368)ELT 276 (All)] also quashed the Circular dated 25.04.2016, stating that Bagasse is not a manufactured product and Rule 6 does not apply.

Judgment:

The Tribunal upheld the findings of the Commissioner (Appeals), stating that the issue is covered by the Supreme Court judgment in DSCL Sugars and the Allahabad High Court judgment in Balrampur Chini Mills. The Tribunal noted that the Circular dated 25.04.2016, which was the basis of the revenue's appeal, had been quashed by the jurisdictional High Court. The Tribunal found no merit in the revenue's appeal and dismissed it, along with the stay applications.

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