2024 (7) TMI 472 - AT - Central Excise

CENVAT credit reversal on sugar manufacturing inputs set aside as bagasse deemed non-excisable agricultural waste under Section 2(f)

CESTAT Allahabad allowed the appeal regarding reversal of CENVAT credit on inputs and input services used in manufacturing sugar and molasses. Following ... Reversal of CENVAT Credit - inputs and input services which were used in the manufacture of main excisable goods, sugar and molasses produced by the Appellant - relevant time - HELD THAT:- The issue is no more res integra and is squarely covered by the decision of the Tribunal in the case of M/S TRIVENI ENGINEERING & INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & S.T., LUCKNOW [2017 (11) TMI 599 - CESTAT ALLAHABAD]. It is found that Hon’ble Supreme Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [2015 (10) TMI 566 - SUPREME COURT] that Bagasse being only an agricultural waste and not being a result of any process, not covered in definition of manufacture under Section 2(f) of the Act and there being no Chapter note or Section note in the Central Excise Tariff declaration process in respect of Bagasse as amounting to manufacture. Thus, notwithstanding the amendment in 2008 in Section 2(d), creating a fiction of deemed marketability, Bagasse is not excisable, as it does not pass through the test of manufacture. Accordingly, whatever amount the Appellant-assessee have paid by way of reversal is in the nature of revenue deposit and there is no limitation attracted for refund of such revenue deposit. Bagasse is not a dutiable item and not a manufactured item, as held by the Hon’ble Supreme Court, there was no question of any reversal of duty under the provision of Rule 6(3) of CCR, 2004. Under such facts and circumstances, the amount reversed by the Appellant under Rule 6(3) of CCR was in the nature of revenue deposit. The impugned order is set aside - appeal allowed. Issues Involved:1. Whether the Appellant was required to reverse CENVAT credit on inputs and input services used in the manufacture of excisable goods.2. Whether the refund claim filed by the Appellant is barred by limitation under Section 11B of the Central Excise Act, 1944.3. Whether the reversal of CENVAT credit by the Appellant is in the nature of a revenue deposit and thus not subject to the limitation period.Detailed Analysis:Issue 1: Reversal of CENVAT CreditThe Appellant, engaged in manufacturing excisable goods (cane sugar and molasses), also generated electricity using bagasse, a by-product from sugarcane crushing. The Department contended that the Appellant was required to maintain separate records for inputs used in manufacturing exempted goods (electricity) under Rule 6(2) of the CENVAT Credit Rules, 2004. Since the Appellant did not maintain separate accounts, the Department issued a Show Cause Notice (SCN) demanding Rs. 6,04,07,447/- under Rule 6(3)(i) of CCR, 2004. The Appellant challenged this SCN, and the Allahabad High Court quashed it, relying on the Supreme Court's ruling in Union of India Vs. DSCL Sugar Ltd., which held that bagasse is an agricultural waste and not a manufactured product. Therefore, the Appellant was not required to reverse CENVAT credit on inputs and input services used in the manufacture of sugar and molasses.Issue 2: Refund Claim Barred by LimitationThe Appellant filed a refund claim for Rs. 39,78,832/- reversed earlier, following the High Court's quashing of the SCN. The jurisdictional Assistant Commissioner rejected the refund claim on the grounds that the duty was not paid under protest and the claim was barred by the one-year limitation period under Section 11B of the Central Excise Act, 1944. The Commissioner (Appeals) upheld this decision, stating that the refund claim was not filed within one year from the High Court's order and that no relief flowed from the High Court's order dated 18.08.2015.Issue 3: Nature of Reversed CENVAT Credit as Revenue DepositThe Tribunal found that the issue was covered by the decision in Triveni Engineering & Industries Ltd. vs. CCE, Lucknow, and the Supreme Court's ruling in Union of India vs. DSCL Sugar Ltd., which stated that bagasse is not a manufactured item and thus not dutiable. Consequently, the reversal of CENVAT credit by the Appellant was in the nature of a revenue deposit, not subject to the limitation period for refunds under Section 11B. The Tribunal held that the Appellant's refund claim, filed within six months of the High Court's order, was within the statutory period. The Tribunal also noted that the Revenue should have suo-motu refunded the amount paid by the Appellant under Rule 6(3) of CCR, 2004.Conclusion:The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant, granting consequential relief as per law. The Tribunal emphasized that the reversal of CENVAT credit by the Appellant was in the nature of a revenue deposit, and thus, the limitation period under Section 11B did not apply.