AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1220
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....1A of the Central Excise Act, 1944, and the since of the CENVAT Credit amount to rs 70.717/- already reversed by them for the period July 2016 to June 2017 under Rule 6 (3) (b) ibid, under protest from RG 23 A Part II, the same is appropriated against payment of the aforesaid demand. The dues adjudged be appropriated immediately. " 2.1 Respondent is engaged in manufacture of excisable goods namely sugar, molasses, ethyl alcohol/ rectified spirit, denatured ethyl alcohol & Fusal oil. They are also availing the CENVAT Credit of the duties/ taxes paid on inputs, capital goods and input services. 2.2 A show cause notice dated 08.05.2018 was issued to the respondent for the demand and recovery of amount payable in terms of Rule 6 of the CENVAT Credit Rules, 2004, in respect of the clearances/ sale of Bagasse and Press Mud for the period July 2016 to June 2017. 2.3 The show cause notice has been adjudicated as per the order in original referred in para 1 above. The appeal filed by the respondent against this order has been allowed by the impugned order. 2.4 Aggrieved revenue has filed this appeal stating following grounds. "Rule 6(1) of the Cenvat Credit Rules, 2004 ....
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....be treated as non-excisable goods i.e. Bagasse and Press Mud, Since now the non-excisable goods are equated with exempted goods, for the purpose of Rule 6 of the Cenvat Credit Rules, as is evident from the Explanations inserted in Rule 6 of the Cenvat Credit Rules, also clearly stated to be "for the purpose of this Rule". In view of the above, requirement of Rule 6 of Cenvat Credit Rules, 2004, as amended vide Notification No.06/2015-CE(NT) dated 01.03.2015 is that when a manufacturer uses common inputs and / or input services in or in relation to manufacture of dutiable final products as well as exempted final product, he either has to maintain separate accounts and inventory of the inputs/input services meant for manufacture of dutiable final products and the exempted final product and avail Cenvat Credit only in respect of input/input services used for manufacture of dutiable final product, and if he does not maintain such separate account and inventory he would be required to pay an amount in terms of the provisions of sub- rule (3) of Rule 6 of the Cenvat Credit Rules,2004. As regards, applicability of the case law cited by the respondent in support of their ....
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.... in appeal and during the course of argument. 4.2 Impugned order records following findings: "6. I have carefully gone through the facts and records of the case as well as the submissions made by the appellant. I find that the adjudicating authority, in the impugned order, has 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. In this regard, OI find that Hon'ble Supreme Court in the case of of UOI vs DSCL Sugars [2015 (32) ELT 769 (SC)], wherein it has been held as under: "10. In the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. 11. Since it is not a manufacture, obviously Rul....
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....ated to be an exempted goods for the purpose of reversal of credit of input in terms of Rule 6 of the Cenvat Credit Rules, 2004 and still the condition of "manufacture" of the exempted goods would be required. 19. Rule 6 of the Cenvat Credit Rules, 2004, as it existed prior to 28-2-2015, is as follows :- "RULE 6. Obligation of a manufacturer or producer of final products and a provider of output service. - (1) The Cenvat credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for exempted services, except in the circumstances mentioned in sub-clause (2). (2) Where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and invertory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of inpu....
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....who does not maintain separate accounts shall be liable to pay an amount of 5% of the value of the manufactured goods. 24. The Hon'ble Supreme Court in the case of Union of India and Others v. M/s. DSCL Sugar Ltd. and Others (supra), held that Bagasse is not a manufactured product but an agricultural waste and residue, which itself is not the result of any process. It is relevant to point out that in the said judgment the Hon'ble Court also considered the amendment in Section 2(d) wherein in the definition of "excisable goods" were duly amended to include any article or material substance capable of being bought or sold for consideration and as such could/shall be deemed to be marketable, and therefore the fiction was introduced wherein certain kinds of goods were treated to be marketable and thus excisable. 25. Considering the aforesaid amendment Hon'ble Supreme Court in Union of India and Others v. M/s. DSCL Sugar Ltd. and Others (supra) held :- "However, before the aforesaid fiction is to be applied, it is necessary that the process should fall within the definition of "manufacture" as contained in Section 2(f) of the Act." 26. The Hon'ble Sup....
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.... exempted goods, but cannot result in Bagasse being manufactured goods, as the nature of Bagasse remains that of an agricultural waste and residue and is not in effect a product. This aspect and character of Bagasse remains unaltered by insertion of Explanation 1. 32. In absence of Bagasse being a manufactured final product, the obligation of a reversal of Cenvat period under Rule 6(1) of the Cenvat Credit Rules, 2004 is not attracted. It has also been noticed that Bagasse has always been an "exempted goods" under Rule 2(d) of the Cenvat Credit Rules, 2004. It has been mentioned in Central Excise Tariff Heading 2303 20 000 and was subjected to NIL rate of duty. It therefore, fell within the definition of "exempted goods" as defined under Rule 2(d) and is not a non-excisable goods, as mentioned in the impugned circular. 33. That the Circular dated 25-4-2016 interpreting Explanation 1 to Rule 6 has provided that "consequently, Bagasse, dross and skimmings of non-ferrous metal or any such by-product of waste, which are non-excisable goods and are cleared for consideration from the factory need to be treated like exempted goods for purpose of reversal of credit of inp....