2024 (5) TMI 1220 - AT - Central Excise

CENVAT credit recovery on bagasse and press mud dismissed as agricultural waste not manufactured goods under Rule 6

Principal Commissioner of CGST, Meerut Versus M/s Tikaula Sugar Mills Ltd.

CESTAT Allahabad dismissed revenue's appeal regarding CENVAT credit recovery on bagasse and press mud clearances. The tribunal held that bagasse and press ... Recovery of CENVAT Credit - clearances/ sale of Bagasse and Press Mud - applicability of Rule 6 of the CENVAT Credit Rules, 2004 - applicability of CBEC Circular No 1027/15/2016-CX dated 25.04.2016 - Relevance of the Supreme Court Judgment in UNION OF INDIA VERSUS DSCL SUGAR LTD. [2015 (10) TMI 566 - SUPREME COURT]. Applicability of Rule 6 of the CENVAT Credit Rules, 2004 - HELD THAT:- Bagasse and Press Mud being non excisable and exempted but having cleared for consideration, therefore provisions of Rule 6 (3) (b) of the CCR are attracted. Relevance of the Supreme Court Judgment in Union of India vs. DSCL Sugar Limited - HELD THAT:- It was held in the said case that 'Cenvat Credit in respect of electricity was denied only on the premise that Bagasse attracts excise duty and consequently Rule 6 of the Cenvat Credit Rule is applicable. Since this action of the appellant is found to be erroneous, all these appeals of the Revenue also stand dismissed' - it is found that Bagasse and Press Mud, being agricultural waste, cannot be said to be manufactured, and therefore, Rule 6 is not applicable. Validity of CBEC Circular No. 1027/15/2016-CX dated 25.04.2016 - HELD THAT:- The amendment carried out in Rule 6 of CCR, with effect from 01.03.2015, clarifying that for the purpose of Rule 6, exempted goods would include non-excisable goods and the CBEC Circular No 1027/15/2016-CX dated 25.04.2016, issued in this regard, is not relevant as Bagasse and Press Mud, being excisable goods, and chargeable to Nil rate of duty, was already covered under the ambit of „exempted goods‟ referred to in the said Rule 6. However, this does not alter the afct there is no manufacture involved in the emergence of Bagasse and Press Mud and therefore Rule 6 of the CCR is not applicable - The circular dated 25.04.2016 which is the backbone of the appeal filed by the revenue has been quashed by the jurisdictional high court. Thus, we do not find any merits in this appeal filed by the revenue. There are no merits in this appeal filed by the revenue - appeal dismissed. Issues Involved:1. Demand and recovery of CENVAT Credit on Bagasse and Press Mud.2. Applicability of Rule 6 of the CENVAT Credit Rules, 2004.3. Relevance of the Supreme Court judgment in Union of India vs. DSCL Sugar Limited.4. Validity of CBEC Circular No. 1027/15/2016-CX dated 25.04.2016.Summary:1. Demand and Recovery of CENVAT Credit on Bagasse and Press Mud:The Commissioner, CGST (Appeals) Meerut set aside the Order in Original No 03/Supdt/Mawana/2018-19 dated 12.12.2018, which confirmed the demand of CENVAT Credit amounting to Rs 70,717/- for input services on Bagasse and Press Mud. The dues adjudged were appropriated immediately.2. Applicability of Rule 6 of the CENVAT Credit Rules, 2004:A show cause notice dated 08.05.2018 was issued for the demand and recovery of amounts payable in terms of Rule 6 of the CENVAT Credit Rules, 2004, for the clearances/sale of Bagasse and Press Mud for the period July 2016 to June 2017. The revenue argued that Rule 6(1) was amended by Notification No. 6/2015-CE(NT) dated 01.03.2015, which included non-excisable goods cleared for consideration as exempted goods. The manufacturer must either maintain separate accounts or pay an amount as per Rule 6(3) if common inputs/input services are used for dutiable and exempted goods.3. Relevance of the Supreme Court Judgment in Union of India vs. DSCL Sugar Limited:The respondent cited the Supreme Court judgment in Union of India vs. DSCL Sugar Limited, which held that Bagasse is an agricultural waste and not a manufactured product; hence, Rule 6 of the CENVAT Credit Rules, 2004, does not apply. The appellate authority found that Bagasse and Press Mud, being agricultural waste, cannot be said to be manufactured, and therefore, Rule 6 is not applicable.4. Validity of CBEC Circular No. 1027/15/2016-CX dated 25.04.2016:The revenue's appeal was based on the CBEC Circular No. 1027/15/2016-CX, which treated Bagasse and similar by-products as exempted goods for the purpose of reversal of credit. However, the jurisdictional High Court quashed this circular, stating that Bagasse is not a manufactured product and Rule 6 does not apply. The High Court upheld the Supreme Court's decision that Bagasse is an agricultural waste and not subject to excise duty.Conclusion:The appeal filed by the revenue was dismissed as the circular dated 25.04.2016, which was the backbone of the revenue's appeal, was quashed by the jurisdictional High Court. The operative part of the order was pronounced in open court.