Custom, Excise & Service Tax Tribunal
Pune - Ii vs Shri Chhatrapati Ssk Ltd on 21 February, 2019
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/88947/2019
Arising out of: Order-in-Appeal No. PUN-CT-APPII-000-042-
18-19 dated 23/05/2018.
Passed by: Commissioner (Appeals), Central Tax, Pune-II.
Appellants - Represented by:
C.C.T. Pune-II Shri N.N. Prabhudesai, Assistant
Commissioner (AR)
versus
Respondent - Represented by:
Chhatrapati SSK Ltd. Shri V.B.Gaikwad, Advocate Date of hearing: 15/01/2019 Date of pronouncement: 21/02/2019 CORAM Hon'ble Shri Ajay Sharma, Member (Judicial) ORDER NO: A/85343 / 2019 The present appeal has been filed by the Revenue from the impugned order dated 23.05.2018 passed by the Commissioner (Appeals-II) Central Tax, Pune by which the learned Commissioner allowed the appeal filed by the respondent herein i.e. the assesee. This appeal is limited to the extent of setting aside the demand of Rs.29,47,984/- with interest and penalty.
2. The issue involved in the instant matter is the demand of E/88947/2018 2 Central Excise duty on the exempted goods i.e. Bagasse, pressmud and composed fertilizer produced during the course of the manufacture of sugar and molasses under Rule 6 of the Cenvat Credit Rules, 2004. The period involved in this matter is March, 2015 to June, 2017.
3. The respondent herein is engaged in the manufacture of sugar and molasses which are cleared on payment of duty. During the course of manufacture of sugar and molasses, by product viz. Bagasse, pressmud and composed fertilizers emerges which is waste, residue by-product or refuse. According to Revenue, the assesee is availing the facilities of Cenvat credit on inputs, input services and capital goods under the Cenvat Credit Rules, 2004. The product Bagasse, pressmud and composed fertilizer is classifiable under Chapter heading no. 23032000 of the First Schedule to the Central Excise Tariff Act 1985 and capable of being bought and sold for a consideration and hence appeared to be excisable goods and chargeable to central excise duty. According to them, the tariff rate of duty for Bagasse, pressmud and composed fertilizer is NIL and therefore these goods are exempted from whole of the duty of central excise during the period March, 2015 to June, 2017. But the assessee neither maintained separate record of inputs/ input services used for manufacture of both exempted and duty paid goods as provided under Rule 6 (2) ibid nor paid an amount equal to 6% of the value of the E/88947/2018 3 exempted goods viz. Bagasse, pressmud and composed fertilizer as provided under rule 6(3) ibid during the period in issue. Accodingly, a show cause notice was issued to the Assesee and the Assistant Commissioner, CGST, Baramati vide order-in-original dated 22.12.2017 confirmed the total demand for an amount of Rs. 56,66,177/- with interest and penalty. On appeal filed by the Assesee the learned Commissioner vide impugned order dated 23.05.2018 allowed the appeal filed by the Assesee.
4. I have heard learned Authorised Representative on behalf of Revenue. None appeared on behalf of respondent-assesee and a written submission was filed on its behalf. Learned Authorised Representative submitted that the Assesee had neither maintained separate record of inputs and input services as provided in Rule 6 (2) nor paid an amount equal to 6% of the value of exempted goods viz. Bagasse, pressmud and composed fertilizer as provided in Rule 6 (3) ibid therefore the adjudicating authority has correctly confirmed the demand of an amount of Rs.56,66,177/- with interest and penalty. He further submitted that the reliance placed by the learned Commissioner on the decision of this Tribunal i.e. order No. A/89563- 89568/17/SMB dated 04.08.2017 in the case of M/s Shivratna Udyog Ltd. and others is not correct as the decision of the Hon'ble Supreme Court on which the reliance was placed by the Tribunal while passing the aforesaid order, pertains to the period prior to March, 2017, E/88947/2018 4 whereas period covered in the instant cases to March 2015 to June 2017. The Assesee by way of written submission cited a number of decisions of the Hon'ble Supreme Court as well as of the Hon'ble High Court and also of this Tribunal in his support that no amount is to be paid and also that reversal of Cenvat credit under Rule 6 of Cenvat Credit Rules 2014 is not required in respect of waste or bio products or refuse generating during the process of manufacture. The list of the cases are as under:
(i) Union of India & Others Vs. DSCL Sugar Ltd. 2015 (322) ELT 769 (SC)
(ii) Rallis India Ltd. Vs. Union of India - 2009 (233) ELT 301 (HC-Bom.)
(iii) M/s Indreshwar Sugar Mills Ltd. & Others etc. Vs. CCE, Pune-III - Final Order No. A/90687-90703/17/SMB, dated 15.11.2017
(iv) Athani Sugars Ltd. & Others etc. Vs. CCE, Pune-III 2017-
TIOL-4280-CESTAT-MUM
(v) Sahakar Shiromani Vasantrao Kale SSK Ltd. Vs. CCE, Pune-
III - 2017-TIOL-4127- CESTAT-MUM
(vi) M/s. ECO Cane Sugar Energy Ltd. & Others etc. Vs. CCE, Kolhapur - 2017 (12) TMI 950- CESTAT-MUMBAI
(vii) M/s Shivratna Udyog Ltd. & Others etc. Vs. Commissioner of Customs & Central Excise - 2017 (9) TMI 985- CESTAT MUMBAI
(viii) Shree Narmada Khand Udyog, Sahakari Mandli Ltd. Vs. Commissioner (Appeals) - 2018 (8) TMI 1075 - CESTAT AHMEDABAD
(ix) M/s Simbhaoli Sugar Ltd. Vs. CCE, Noida - 2018 (8) TMI 160
- CESTAT ALLAHABAD
(x) M/s Triveni Engineering & Industries Ltd. Vs. C.C. & C.E. & S.T. -Noida - 2018 (8) TMI 6 - CESTAT ALLAHABAD The Hon'ble Supreme Court in the matter of DSCL Sugar Ltd (supra) has laid down that Bagasse emerging as residue and waste of sugar, is not a product manufactured and will not come under the definition of "manufacture".
E/88947/2018 5
5. Only because an explanation was inserted to Rule 6 ibid vide notification dated 01.03.2015, the Revenue is of the view that Bagasse, pressmud and composed fertilizer being non-excisable goods but capable of being sold for a consideration and has been sold for consideration therefore it would come within the scope of Rule 6. The said explanation to Rule 6 reads as under:
"Rule 6(1) The Cenvat credit shall not be allowed on such quantity of inputs used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provisions of exempted service except in the circumstances mentioned in sub-rule(2):
Provided that the CENVAT credit on inputs..............
Explanation 1:- For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of Rule 2 shall included non-excisable goods cleared for a consideration from the factory."
The aforesaid explanation-I reveals that non-excisable goods cleared for consideration, would fall within the scope of the said Rule. The contention of the Revenue is that since, the "exempted goods", "final products" defined under the CENVAT Credit Rules, 2004 in clause
(d) and clause (h), respectively of Rule 2 include non-excisable goods, which is cleared for consideration from factory, hence Rule 6(1) is applicable to the by-product bagasse, pressmud and composed fertilizer. Clause (d) and (h) of the said Rule 2 reads as follows:-
"(d) "exempted goods" means excisable goods which are exempt from the whole of the duty of excise leviable thereon, E/88947/2018 6 and includes goods which are chargeable to "Nil" rate of duty;
(h) "final products" means excisable goods manufactured or produced from input, or using input service;"
The Hon'ble Supreme Court's decision in the matter of DSCL Sugar Ltd. (supra) has clearly laid down that Bagasse is agricultural waste of sugarcane and the waste and residue of agricultural products, during the process of manufacture of goods cannot be said to be result of any process. There is no manufacturing process involved in Bagasse's, pressmud and composed fertilizer production. "Bagasse, pressmud and composed fertilizer" is not 'goods' but merely a waste or by- product, therefore Rule 6 of CENVAT Credit Rules, 2004 is not applicable in the present case. "Bagasse, pressmud and composed fertilizer" is bound to come into existence during the crushing of the sugarcanes and is an unavoidable agricultural waste.
6. A consistent view has been taken by this Tribunal that Rule 6 of CENVAT Credit Rules, 2004 has no application in given facts. For instance, in a recent decision in the matter of M/s Shivratna Udyog Ltd. & Others (supra), while allowing the appeal, the following order has been passed by this Tribunal :-
"I have carefully considered the submissions made by both sides. The fact of the case is that the appellants' goods in dispute are bagasse, press-mud, boiler ash and compost which are either waste or by-products. The issue is to be decided is whether in terms of Rule 6(3) an amount of 6% is required to be paid on the clearance of such waste/by product. The issue has been considered in various judgments. In the case of Rallies India Ltd. Vs. Union of India 2009 (233) E/88947/2018 7 ELT 301 (Bom.) the Hon'ble Bombay High Court has held that the provisions of Rule 57CC which pari materia to Rule 6 of the Cenvat Credit Rules 2004, in case of waste arising during the course of manufacture of final product, Rule 57CC is not applicable. It was also held in the said judgment that liability under Rule 57CC arises only for final product and not for waste the Hon'ble High Court also considered the provisions of Rule 6 of Cenvat Credit Rules 2004. The similar issue was considered in the case of Union of India vs. Hindustan Zinc Ltd. (supra) wherein it was held that the Sulfuric Acid which is generated as a by product recovery of 8% under Rule 6 of Cenvat Credit Rules 2004 is not correct. In view of the above judgments the issue whether Rule 6(3) is applicable in case of removal of non-dutiable waste or by product is settled in favour of the assessee. As regard the submissions made by Ld. ARs that after insertion of explanation in Rule 6(1), even in case of non-excisable goods, the reversal under Rule 6(3) is required. In this regard he referred to the Hon'ble Supreme Court judgment in the case of DSCL Sugar Ltd.(supra). Wherein the Hon'ble Supreme Court has held that in case of non-manufactured/non- excisable goods under Rule 6(3) would not apply and after the amendment in Rule 6(1) by inserting explanation, the ratio of the Hon'ble Supreme Court judgment will not applicable for the period after amendment. On careful consideration of this submission, I find that the issue before the Hon'ble Supreme Court in DSCL Sugar Ltd. was that whether Rule 6(3) is applicable in case of non-excisable goods. However, in the present case all the goods which are cleared without payment of amount under Rule 6(3) are either by product or waste. In case of by product or waste the decision of Jurisdictional High Court of Bombay in the case of Rallies India Ltd.(supra) settled the issue that case of by product or waste cenvat credit cannot be denied. As provided in para 3.7 of Chapter 5 of CBEC Circular which reads as under:
"3.7 CENVAT credit is also admissible in respect of the amount of inputs contained in any of the waste, refuse or bye product, Similarly, CENVAT is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly".
From the above para, it is clear that if any input is contained in waste by product or goods the cenvat credit shall not be denied. If rule 6(3) is made applicable in these goods this clarification will stand redundant. If legislator has intention even to apply Rule 6(3) on waste or by-product, refuse then E/88947/2018 8 either this para should have been amended or omitted. Since this clarification is still in force the Cenvat credit either by way of Rule 6(3) or otherwise cannot be denied. As per my above discussion, I am of the considered view that in case of removal of waste or by-product Rule 6(3) has no application. Accordingly, the impugned orders are set aside. The appeals are allowed.
7. Therefore in view of the discussions made hereinabove, the appeal filed by Revenue is hereby dismissed.
(Pronounced in Court on 21/02/2019) (Ajay Sharma) Member (Judicial) arch