Rule 6 inapplicable to waste by-products from sugar manufacture; credit reversal demand on bagasse, press mud and bio-compost was set aside.

Bagasse, press mud and bio-compost arising inevitably in sugar manufacture were treated as waste or residue, not manufactured final products. The Tribunal applied settled law that Rule 6 of the Cenvat Credit Rules, 2004 operates only where exempted final products are manufactured, and not where non-excisable by-products or waste emerge during production of dutiable goods. The amendment to section 2(d) of the Central Excise Act, 1944 and departmental circulars did not change that position, because saleability alone did not make such waste excisable goods. Rule 6 was therefore held inapplicable, and the demand for reversal of credit or payment of 5% was set aside.

---

---

Issues: Whether Rule 6 of the Cenvat Credit Rules, 2004 required reversal of proportionate credit or payment of 5% amount in respect of bagasse, press mud and bio-compost cleared as waste or by-products arising in the manufacture of sugar.

Analysis: The Tribunal held that the dispute was covered by settled law. Bagasse and press mud were treated as waste or residue emerging inevitably in the course of manufacture and not as manufactured final products. The amendment to Section 2(d) of the Central Excise Act, 1944 and the departmental circulars did not alter the position that such waste did not become excisable goods merely because it was capable of being sold. The Tribunal relied on the binding view that Rule 6 applies only where exempted final products are manufactured, and not where non-excisable waste emerges during production of dutiable goods.

Conclusion: Rule 6 was held inapplicable, and the demand for reversal of credit or payment of 5% amount on bagasse, press mud and bio-compost was set aside in favour of the assessee.

Ratio Decidendi: Waste or residue that emerges inevitably during manufacture and is not itself a manufactured final product does not attract Rule 6 of the Cenvat Credit Rules, 2004, even if it is sold for consideration and is treated as marketable by a deeming provision.

---