TaxTMI 
TaxTMI 
2026 (6) TMI 896
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....by-product 'Bagasse' falling under tariff item 23032000 of Central Excise Tariff Act, 1985 generated during manufacture of sugar, without payment of duty under commercial Bills/Invoices. They are not maintaining Central Excise statutory accounts about production/generation and clearance of the said product and have also not shown the same in their ER-1 returns. On scrutiny of CENVAT account, it was noticed that they have availed Cenvat Credit of the service tax paid on various input services like Telephone Service, Security service, Maintenance & Repair service, Sales Commission service, Business Auxiliary Service etc., which are used for manufacture of both dutiable as well as not dutiable goods. However, they have not maintained separate accounts for receipt, consumption and inventory of input services meant for use in the manufacture of dutiable final products and exempted goods. The assessee has made clearance of 62455.40 MT of 'Bagasse' valued at Rs. 11,22,16,851/- during the period from March-2016 to January-2017. As per clause (1) of Rule 6, sub-rule (3) of Cenvat Credit Rules, 2004 as amended (hereinafter referred to as CCR 2004), a manufacturer, opting not to maintain sepa....
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....imited's Case (supra). Their Lordships observed as follows:- "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 note. In the absence of 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 if not a manufacture, obviously Rule 6 of Cenvat Credit Rules, 2001 shall have no application as rightly held by the High court" 6.2 In view of the above settled position, that since the production of 'bagasse' cannot be termed as manufacture as defined by Section 2(f) of the Act, following judicial discipline, I hold that "bagasse" which emerges as a waste/by product, fall outside the scope of Rule 6 of CCR, 2004". 3.1 He submitted that after the judgment passed by Hon'ble Supreme Court in the case of Union of India vs. DSCL Sugar Limited reported....
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.... as well as the Circular No. 1027/15/2016-CX dated 25.04.2016 issued by the Board. The said Order of the Hon'ble High Court has also been challenged before Hon'ble Supreme Court. 3.3 Learned AR argued that it is a settled legal position that executive Instructions cannot override or supersede Statutory Rules or add something therein, nor the orders can be issued in contravention of the Statutory Rules for the reason that an administrative instruction is not a Statutory Rule nor does it have any force of law. Statutory Rules have full force of law provided, same are not in conflict with the provisions of the Act as held in the case of State of U.P. and Ors. vs. Babu Ram Upadhyaya, AIR 1961 SC 751. Learned AR also submitted that for reversal of credit on Bagasse and such identical products, in terms of Rule 6 of the CCR 2004, Rule 6(1) of the CCR 2004 was amended which is still in force. It cannot be denied in this case that clearance of exempted by-product viz. 'Bagasse' was made for consideration by the respondent and accordingly, they were liable to reverse the amount equal to 6% of the value. Even after the adverse judgments passed by the Tribunals and High Cou....
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....s. Commissioner of Central Excise, Meerut-I reported at 2013 (290) ELT 251 (Tri. Del.) - the CESTAT held that bagasse emerges in the course of crushing of sugarcane and press mud emerges during the course of manufacture of molasses as an inevitable product. Thus, keeping in mind that the appellant (of that case, just like in the present case) is engaged in manufacture of sugar and molasses in which process, the waste product i.e. bagasse and press mud are generated, it cannot be said that the appellant possibly could have maintained separate accounts for inputs for production of excisable items sugar and molasses and exempted items i.e. bagasse and press mud. Thus, the amendment in Finance Act, and the board's circular would not make any difference so far as the plea of assessee is concerned. The Tribunal further observed that otherwise also, it may be noted that Hon'ble Allahabad High Court vide its judgement dated 18.05.2022 in a bunch of Writ Petition including Writ Petition No. 11791 (M.B.) of 2010 titled Balarampur Chinni Mills & Ors vs. Union of India & Ors., has held that bagasse generated in the course of crushing of sugarcane is not 'excisable item' notwithstanding the....
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....r Mills and Commissioner Central Excise, Meerut v. U.P. State Sugar Corporation and held that the Bagasse and press mud are not final products of the manufacture. Accordingly, recovery of 8% amount of the waste Bagasse and press mud cleared by the said sugar company was held to be not justified. 24. The Hon'ble Apex Court while dismissing the Civil Appeal No. 2791 of 2005 preferred by the department vide judgment and order dated 21-7-2010, upheld the findings recorded by the Tribunal that reversal of 8% under Rule 57CC is not applicable as 'Bagasse' is not a final product, but it is a waste. It is worthwhile to mention here that in the judgment dated 22-11-2004 of Tribunal, it was specifically referred in para 2 that the appeal filed by the Commissioner, Central Excise in the case of CCE v. M/s. Kicha Sugar Co. Limited was dismissed by Hon'ble Supreme Court on 20-2-2004. 25. As held by the Apex Court, bagasse is not a manufactured goods and it is never manufactured, but it only emerges in the process of final product, namely, sugar. Bagasse being not a manufactured goods and being a waste, hence Rules 6(2) and 6(3) are not applicable. 26. Section 2(d), as....
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....ods' has been defined, will not make bagasse, which, as stated hereinabove, is an agricultural waste to be a dutiable item and the Chief Commissioner vide Circular dated 3-10-2009 nullified the judgment and order dated 21-7-2010 rendered in Civil Appeal No. 2791 of 2005. 30. Bagasse is classified under sub-heading 2303 20 00 of Central Excise Tariff Act. In view of the judgment of Apex Court in Civil Appeal No. 2791 of 2005, Commissioner of Central Excise v. Balrampur Chini Mills, Gonda, decided on 21-7-2010, the Circular of the Chief Commissioner, Central Excise, Lucknow as well as Circular of Central Board of Excise and Customs are liable to be quashed which is the basis for issuing the demand. 31. In the impugned notice dated 27-9-2010, it has been mentioned that as per Rule 6 of the Cenvat credit is availed on the inputs which are used in the manufacture of both dutiable and final products, then an amount equal to 10% (upto 6th July, 2009) or 5% (w.e.f. 7-7-2009) of the sale value of exempted final products is required to be paid. Therefore, neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are n....
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..... 2. It may be recalled that rule 6 of the CENVAT Credit Rules, 2004 was amended with effect from 1.03.2015 by inserting Explanation 1 and 2 in sub-rule (1) of rule 6, which provides that exempted goods or final product shall include non-excisable goods cleared for consideration from the factory. 3. Accordingly, Circular No. 1027/15/2016-CX dated 25.04.2016 was issued highlighting that Bagasse, Dross and Skimmings of non-ferrous metals or any such byproduct or waste, which are non-excisable goods and are cleared for a consideration from the factory need to be treated like exempted goods for the purpose of reversal of credit of input and input services, in terms of rule 6 of the CENVAT Credit Rules, 2004. This circular was issued in the background of judgement of the Hon'ble Supreme Court in the case of Union of India Vs. M/s. DSCL Sugar Ltd [2015 (322) E.L.T. 769 (S.C.)] holding that Bagasse is only an agricultural waste and residue and it is not a result of any process which can be termed as manufacture', Similar conclusion was also drawn by the Hon'ble High Court of Bombay in the case of M/s Hindalco Industries Ltd. Vs. Union of India (2015 (315) E.L.T.1....