CENVAT credit reversal on bagasse overturned after bagasse held non excisable by precedent; credit demand quashed.

Reversal of input credit under Rule 6 was contested on the basis that bagasse is non excisable; reliance on a departmental circular was undermined by its withdrawal. The tribunal applied the Supreme Court precedent holding bagasse non excisable and treated it as not a manufactured excisable product, resulting in denial of the department's demand for reversal of CENVAT/ input services credit. The lower authority's order demanding credit reversal was quashed and the appeal allowed, with consequential relief granted.

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Issues: (i) Whether bagasse arising from crushing of sugarcane is an excisable product for purposes of reversal of cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004; (ii) Whether the demand for reversal of input and input service credit on account of classification of bagasse as excisable is sustainable.

Issue (i): Whether bagasse is an excisable product.

Analysis: Earlier departmental Circular No. 1027/17/2016-CE dated 25.04.2016 treated bagasse as a waste/clearance item; that Circular has been withdrawn by Circular No. 1084/05/2022-CE dated 07.07.2022. Subsequent authoritative pronouncement holds bagasse to be non-excisable product, removing it from the category of manufactured excisable goods.

Conclusion: Bagasse is non-excisable.

Issue (ii): Whether reversal of input and input service credit under Rule 6 of the Cenvat Credit Rules, 2004 is justified on the basis that bagasse is an excisable product.

Analysis: Reversal under Rule 6 of the Cenvat Credit Rules, 2004 is contingent on the goods being excisable/manufactured excisable product. Given the conclusion that bagasse is non-excisable and the withdrawal of the earlier Circular relied upon by the department, the foundational premise for demanding reversal of cenvat credit does not stand.

Conclusion: The demand for reversal of input and input service credit is not sustainable and is liable to be quashed.

Final Conclusion: The appeal is allowed; the impugned order demanding reversal of cenvat credit on account of bagasse being treated as excisable is set aside with consequential relief.

Ratio Decidendi: Where an item is held to be non-excisable, reversal of cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 cannot be sustained.

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