Custom, Excise & Service Tax Tribunal
Sharad Ssk Ltd vs Commissioner Of Central Excise, ... on 31 August, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
E/S/1650,1651,1878, 1879,1888/12 &APPEAL NO.E/1064,1065,1218, 1226& 1219/12
(Arising out of Order-in- Appeal No.PII/RKS/112 to 130/2012 dtd.19.4.2012 passed by the Commissioner of Central Excise(A), Pune.II )
For approval and signature:
Honble Mr S.S.Kang, Vice President
Honble Mr.Sahab Singh, Member(Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Sharad SSK Ltd.
D.Y.Patil SSK Ltd
Sharad SSK Ltd.
D.Y.Patil SSK Ltd.
Sharad SSK Ltd.
:
Appellants
VS
Commissioner of Central Excise, Kolhapur
Respondent
Appearance
Shri V.B.Gaikwad, Advocate for Appellants
Shri V.R.Kulkarni, Dy.Commr.(A.R.) for Respondent
CORAM:
Mr. S. S. Kang, Vice President
Mr.Sahab Singh, Member(Technical)
Date of hearing: 31/08/2012
Date of decision 31/08/2012
ORDER NO.
Per : S.S.Kang
Heard both sides.
2. As common issues are involved hence all applications are taken up together.
3. The appellants filed these applications for waiver of pre-deposit of duty, interest and penalty. The applicants are engaged in the activity of manufacture of sugar and molasses. The waste obtained during the manufacture of sugar are referred as bagasse, press mud and bio-compost. The Revenue is of the view that the applicants availed credit in respect of common inputs and input service in the manufacture of final product cleared on payment of duty and in respect of the goods which are cleared without payment of duty and are not maintaining separate account therefore, the applicants are liable to pay appropriate duty as provided in the CENVAT Credit Rules, 2004, on the price of bagasse, press mud and bio-compost the demands are confirmed.
4. The applicants submitted that bagasse, press mudand bio-compost can not be treated as manufactured goods and the issue is settled by the decision of the Honble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. vs. Union of India and Others in Writ Petition No. 11791 (M/B) of 2010 order dated 18.5.2012, the Honble High Court after relying the decision of the Honble Supreme Court in the case of CCE Vs. Shakumbhari Sugar & Allied Industries Ltd. 2005 (189) ELT 62 (SC) held that the bagasse is nothing but a waste obtained during manufacture of sugar and cannot be regarded as a final product exempt from duty. The applicant also relied upon the decision in the case of Indian Potash Ltd. vs. CCE Allahabad AIT-2012-172-CESTAT whereby the demand in respect of Bagasse which was confirmed on the same ground was set aside.
5. In respect of press mud, the contention of the applicant is that the Tribunal in the case of Amaravathi Co-Operative Sugar Mills Ltd. vs. CCE Coimbatore 2012-TIOL-937-CESTAT-MAD after taking into consideration the arguments of the Revenue, held that the press mud and sludge is a waste and also non-excisable and the demands which were confirmed on the same ground set aside.
6. In respect of bio-compost the applicants relied upon the decision of the Tribunal in the case of Manakpur Chini Mills vs CCE in E.304/11 & E/2912/1 vide final order dated 7.6.12 set aside the demand which was confirmed on the same ground.
7. The contention of the Revenue is that in the Central Excise Tariff Act bagasse is specifically mentioned and attracting nil rate of duty and press mud is also excisable goods and also manufactured products and the same are classifiable under Chapter-heading No. 23032000 of the Tariff. The Revenue also relied upon the decision in the case of Commissioner of Income Tax vs. N.C. Budharaja & Co. - AIR 1993 SC 2529 to submit that the word produce or manufacture has to be understood in the normal connotation the sense in which it is understood in commercial world. It is equally well to keep in mind the context since a word takes its colour from the context. The word articles is preceded by words it has begun or begins to manufacture or produce. It also takes in the bye-product which emerges in the course of manufacture of goods. The contention of the Revenue is that as bagasse and press mud is produced during the manufacture of sugar and molasses and therefore, it cannot be said that the same are not excisable goods. As the goods are produced during the manufacture of sugar and molasses and nil rate of duty are applicable and the demands are rightly made.
8. We find that the demand is confirmed by invoking the provisions of Rule 6 of CENVAT Credit Rules, 2004 which provides that in case of manufactured products, both dutiable as well as exempted goods by availing credits in respect of common inputs, the manufacturer has to maintain separate account for the manufacture of exempted goods. In case, the manufacturer is not maintaining separate accounts, the manufacturer is liable to pay 5%-10% of the price of the exempted goods. The case of the Revenue is that bagasse and press mud are excisable goods, and the manufacturer of sugar and molasses are not maintaining separate records hence, as per the provisions of Rule 6 of the CENVAT Credit Rules, 2004, the manufacturer has to pay 5%-10% of the price of the exempted goods i.e. bagasse and press mud.
8.1 Regarding demanding duty by invoking the provisions of Rule 6 in respect of bagasse, we find that the issue is now settled by the decision of Honble High Court in the case of Balrampur Chini Mills Ltd. (supra). The Honble High Court after taking into consideration the decision of the Supreme Court in the case of CCE vs. Shakumbhari Sugar & Allied Industries Ltd. (supra) held that bagasse generated from the crushing of the sugarcane which is neither manufactured goods nor manufactured final product, but it is a residue/waste and the demand by invoking the provisions of Rule 6 is not sustainable. Further, we find that the Tribunal in the case of Indian Potash Ltd. (supra) after taking into consideration the decision of the Honble Supreme Court in the case of Shakumbhari Sugar & Allied Industries Ltd., also taken the same view and held as under:-
6. We have considered the rival submissions. We find that bagasse emerges in course of crushing of sugarcane. It may be noted that crushing of sugarcane is necessary to extract can sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane. Therefore, by no stretch of imagination it can be said that the assessee possible could have maintained separte account for the inputs for production of sugar and molasses (excisable item) andd bagasse. Thus, in our considered view, the amendment in Finance Act, cited by Shri Nagesh Pathak, AR and the Board Circular would not make any difference in the facts and, circumstances of the case. Moreover, neither the show-cause notice nor the impugned order in appeal mentions as to which common CENVAT credit availed inputs have been used in manufacture of sugar and molasses (dutiable final products) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any input-chemicals etc. having been used at that stage. Accordingly, we find merit in the contention of the appellant. The impugned order is set aside. The appeal and station applications are allowed. 8.2 In respect of press mud, we find that now the issue is settled by the decision of the Tribunal in the case of Amaravathi Co-Operative Sugar Mills Ltd. (supra) relied upon by the applicant where the Tribunal after taking into consideration the decision of Rallies India Ltd. vs. Union of India 2009 (233) ELT 301 (Bom.) and other decisions held that the demand of 5%/10% on press mud, which are in the nature waste, is not sustainable and held as under:-.
5. I have considered arguments from both sides, the case records as well as the cite case laws. The impugned goods namely, press mud and sludge are classifiable respectively under CET Heading 2303 20 00 and 2303 30 00. Regarding such classification there is no dispute raised by either side. However, against the entries in both these Headings, the duty amounts specified is nil. The Explanation to Section 2(d) is a deeming clause which renders any goods which are capable of being bought and sold for a consideration to be marketable. The cited decision of the Honble Allahabad High Court in the case of Hindalco Industries (supra) is also to this effect. This deeming fiction became necessary to be created in the light of various judgements that merelyb because some goods are sold they cannot be held to be marketable and consequently they cannot be considered to be excisable as excisability implied manufacture and marketability. However, the main definition of excisable goods under Section 2(d) is as under:-
Excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt.
The definition itself implies that goods must be specified in the First Schedule or Second Schedule of the Central Excise Tariff Act, 1985, 1985, and the same should be subjected to a duty of excise. In the instant case, no doubt, the impugned items namely press mud and sludge are specified in the First Schedule to the Central Excise Tariff Act, 1985 against Heading No. 2303 20 00 and 2303 30 00 in general terms but they are not subject to a duty of excise, as under the rate column the duty of excise is indicated as nil. Therefore, an important ingredient in the definition that the goods must be subject to a duty of excise is not satisfied in the present case. Hence, till such time, no duty is specified in the First Schedule o the Central Excise Tariff Act, 1985, press mud and sludge cannot be considered to be excisable goods.
6. The CENVAT Credit Rule 6(1) states that CENVAT credit shall not be allowed on such quantity of input used for manufacture of exempted goods. The expression exempted goods has been defined for the purpose of CENVAT Credit Rules in Rule 2(d) to mean excisable goods which are exempt from the whole of duty of excise leviable thereon and includes goods which are chargeable to nil rate of duty. As per this definition, the impugned goods namely press mud and sludge would be covered under the definition exempted goods, though the same cannot be treated as excisable goods for the reasons stated in paragraph 5 above. The question raised in this case is whether in terms of Rule 6(3)(i), an amount equal to 10% / 5% would be payable on such goods. While considering this question, I take note of the fact that these goods are definitely in the nature of by-product and waste. In the cited decision in Rallies India (supra), the Honble Bombay High Court, reversing the earlier decision of the Larger Bench of the Tribunal, has held that when common inputs are used in manufacture of dutiable and exempted products, the liability to pay the amount of 8% as it was applicable at the relevant time would arise only for final products and not for waste. This decision of the Honble Bombay High Court has been applied by this Bench in the case of M/s. Sterling Biotech (supra). In the case of Vishal Pipes (supra), the Division Bench of the Tribunal has also referred to the Boards Circular No.345/61-97-CX dated 23.10.1997 to the effect that there should be no denial of credit even if a part of an input is contained in scrap, waste, residue etc. notwithstanding the fact that the erstwhile Rule 57D was no longer in force.
7. Further, paragraph 3.7 in Chapter 5 of the CBECs Central Excise Manuel (sic) referred to by the learned SDR states that CENVAT credit is also admissible in respect of amounts of inputs contained in any of the waste, residue or by-product. It further states that 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.
8. Considering the precedent decisions cited above, Boards Manual provisions as well as Boards circular cited above, I am of the view that the demand of 10% / 5% on press mud and sludge, which are in the nature of by-product and waste and also non-excisable cannot be sustained.
9. Consequently, the impugned order is set aside and the three appeals are allowed. 9 We find that the Honble Supreme Court decision in the case of Commissioner of Income Tax vs. N.C. Budharaja & Co. is not applicable in the facts of present case as the Honble Supreme Court was interpreting the provisions of Income Tax which are not parallel to the provisions of Central Excise Act and Rules.
10. In respect of Bio-compost the Tribunal in the case of Manakpur Chini Mills (supra) held that demand of duty in respect of Bio-Compost cleared by sugar manufacturer is not available.
11. We find no reason to take contrary view as the issues involved in these appeals are already decided by the above mentioned decisions. Hence the impugned orders are set aside after waiving the pre-deposit of dues and the appeals are allowed.
(Pronounced in court) Sahab Singh Member(Technical) S. S. Kang Vice President pv 8