Duty on bagasse and press mud

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

one of my customer manufacturers of sugar and while production there is bye products of bagasse and press mud. And they are claiming common Cenvat credit. Recently the central excise officer came to their premises for audit and asking them to reverse the Cenvat credit proportionately or pay duty on bagasse and press mud at 5% duty. I gone through several judgements stating that, it is not required to reverse the Cenvat credit. Now I would like to know what is present position under central excise act.

And

my client is pledging the sugar and taking the payment against which government is giving guarantee for this pledging of sugar being our company as registered as cooperative societies and based on the guarantee given by the government the company is paying the commission to government, the central excise officer is asking us to pay service tax under reverse charge mechanism as support service received from the government.

can you please clarify the aforesaid doubt asap.

[KASTURI SETHI]

Go through Circular No.1027/CE dated 25.4.16

[Ganeshan Kalyani]

Sri Kasturi Sir thanks for apt reply. Thanks.

[THYAGARAJAN KALYANASUNDARAM]

Respected sir,

I gone through the circular issued by the authority. As per the circular we have to reverse the credit w.e.f. March 2015 onwards.

[KASTURI SETHI]

Yes Sir. You have rightly understood the circular.

[THYAGARAJAN KALYANASUNDARAM]

Respected sir,

Thanks for your support.

[THYAGARAJAN KALYANASUNDARAM]

Respected sir,

Further, one more clarification after many judicial pronouncements in various high courts and apex court, still the assessee will bind the circular issued by the CBEC. As per my understanding this will be binding only internal authorities how far it will be binding the assessees. Can you clarify sir.

[KASTURI SETHI]

Dear Sir,

I agree with you Board's circulars are not binding on the assessees. These are binding on the department. Circular contains clarificatory guidelines. Pl. note it is based on the judgements of various courts. It has weightage.

Rest decision is yours. No use of litigation at all.

[Ganeshan Kalyani]

Sir, department officials will work as per Circular. In higher forum the litigation is heard and concluded. But in administration level these kind to legality won't work. This is my observation. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Yes, Sir. This is what I mean.

AI Summary

Cenvat credit reversal for by products prompts proportionate duty implications; circulars bind the department but not assessees.
Liability to reverse Cenvat credit arises for by products (bagasse, press mud) where departmental audit may require proportionate reversal or duty on such by products; Circular No.1027/CE directs reversal from a stated retrospective point and is applied by the department. Board circulars are clarificatory guidance binding on departmental officers but not strictly binding on assessees, though they carry persuasive weight and influence compliance practice; taxpayers may elect litigation over administrative acceptance.