Custom, Excise & Service Tax Tribunal
M/S. U.P. State Sugar Corporation Ltd vs Cce, Meerut-I on 5 November, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
COURT NO. III
Excise Appeal No. 4080/2010-EX(SM)
[Arising out of Order-In-Appeal No. 175-CE/MRT-I/2010 dated 30.08.2010 passed by CCE, Meerut]
For approval and signature:
Honble Ms. Archana Wadhwa, Judicial Member
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Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
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Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s. U.P. State Sugar Corporation Ltd. Appellant
Vs.
CCE, Meerut-I Respondents
Coram: Honble Ms. Archana Wadhwa, Judicial Member Appearance:
Shri Alok Arora, Advocate for the Appellant Shri M.S. Negi, DR for the Respondent Date of Hearing: 05.11.2013 FO ORDER NO._58338/2013_ Per Ms. Archana Wadhwa:
The appellant are a sugar mill. They avail Cenvat credit of Central Excise Duty paid on inputs and capital goods used in or in relation to their final products. In course of manufacture of sugar, an item called press mud emerges which is the waste component of the cane juice arising in course of the cleaning of the juice. The department is of the view that since the appellant had taken Cenvat credit on the inputs and since they have not maintained separate account and inventory of the inputs meant for dutiable final products and exempted final product, they are required to pay an amount equal to 10% of the value of the press mud in accordance with Rule 6 (3) of the Cenvat Credit Rules, 2004. It is on this basis that demand of Rs. 89,155/- was confirmed for the period from May 2008 to March 2009, alongwith interest and penalty of equal amount was imposed. On appeal to Commissioner (Appeals), the Commissioner (Appeals), while upholding the demand of Rule 6 (3) of Cenvat Credit Rules, alongwith the interest, set aside the penalty. Against this order, the present appeal stands filed.
2. Heard both the sides represented by Shri Alok Arora, learned. Advocate and Shri M.S. Negi, learned DR.
2.1 Shri Alok Arora, Advocate, the learned Counsel for the appellant, pleaded that the issue involved in this case is covered by the judgment of the Tribunal in the case of CCE, Meerut I vs. Shakumbari Sugar & Allied Ind. Ltd. reported in 2004 (176) E.L.T. 819 (T), wherein it was held the bagasses emerging in a sugar mill cannot be called dutiable product, as it is nothing but waste and hence the provisions of Rule 57 (CC) of Cenvat Credit Rules, 1944 would not be applicable, that this judgment of the Tribunal has been upheld by Honble Supreme Court vide judgment reported in 2005 (189) E.L.T. A62, that like bagasse, the press mud obtained is nothing but waste from the cane sugar which arises in course of cleaning of the same, that the product is not excisable and hence the provisions of Rule 6 (2) and 6 (3) of Cenvat Credit Rules, 2004 are not applicable, that the demand of Rs. 89,155/- and interest is not sustainable, He accordingly prays for the setting aside the impugned orders and allowing the appeal.
3.2 Shri M.S. Negi, learned Departmental Representative, pleaded that the judgment of the Tribunal/ Honble Supreme Court in the case of CCE, Meerut I vs. Shakkumbari Sugar & Allied Ind. Ltd. (supra) is not applicable to this case as during this period, the definition of goods, as given in Section 2 (d) of Central Excise Act, had been amended by adding an explanation according to which, the goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable, that since the press mud was being sold, in terms of the amended provisions of Section 2 (d), the same has to be treated as excisable goods and hence the provision of Rule 6 (3) would be applicable. He, therefore, pleads for rejection of the appeal.
3. I have carefully considered the submissions from both the sides and perused the records.
4. The item, in question, i.e. press mud is the impurity of the cane juice which has to be removed by cleaning the same and the press mud arises in course of cleaning of the cane juice. Under the provisions of Rule 6 (2) of Cenvat Credit Rules, 2004 when common Cenvat availed inputs are used in or in relation to manufacture of dutiable as well as exempted final products, the manufacturer is required to either maintain separate account and inventory of the inputs used in or in relation to the manufacture of dutiable final products and the inputs used in or in relation to the manufacture of exempted final product and take Cenvat credit only in respect of those goods used in or in relation to the manufacture of dutiable final products or alternatively if he does not maintain such an account, he is required to pay an amount, as prescribed under Rule 6 (3), which in respect of the goods, in question, would be 10% of the value of the final product. I am of view that the requirement of Rule 6 (2) can be fulfilled only in respect of the final products which a manufacturer wants to manufacture and this requirement cannot be fulfilled in respect of inevitable waste or by product, as when in the manufacture of some final product, some waste or inevitable by-product emerges, the manufacturer, even if he wants to comply with the provisions of Rule 6 (2), cannot do so. It is in view of this, the Tribunal in the case of Narmada Gelatines Limited vs. CCE, Bhopal reported in 2009 (233) E.L.T. 332 (Tri. Del.) has held that in such a situation the provisions of Rule 6 (2) and 6 (3) would not apply. Same view has been taken by the Honble Bombay High in the case of Rallis India Ltd. vs. Union of India reported in 2009 (233) E.L.T. 301 (Bom.).
5. I also take note of latest decision of the Honble High Court of Madras reported as Commissioner of Central Excise, Pondicherry V/s. EID Parry (I) Ltd. 2013(293) ELT 10 (Mad.) wherein while dealing with an identical issue of applicability of Rule 6 to press mud emerged during the manufacture of sugar and spent emerged during the manufacture of Denatured Ethyl Alcohol, the Honble Court rejected the Revenues stand by observing as under:-
16. As rightly contended by the learned counsel for the assessee, the characteristic of sugarcane containing various chemicals cannot be stopped or prevented by the manufacturer to pass on even to the wastes, as it is undoubtedly a natural flow of in born character from one stage to another. Only when there is a further addition of inputs or chemicals with similar characteristics externally by the manufacturer, the Revenue can invoke Rule 57CC. In other words, when spent wash and press mud had emerged as inevitable wastes during the process of manufacturing of final products viz., sugar and Denatured Ethyl Alcohol and the said wastes are combined and treated together to form another final product viz., bio-compost, the said final product cannot be brought under Rule 57CC.
17. We are conscious of the fact that what is in dispute is not the question as to whether bio-compost fertilizer is a final product or not, but on the other hand the question is as to whether such final product is liable to be brought under Rule 57CC of the Central Excise Rules or not. Press mud is an unavoidable and inevitable waste which arises when the cane juice obtained after crushing the sugarcane is further processed for manufacture of sugar. Press mud is nothing but impurities present in the cane juice. Likewise, spent wash is an inevitable waste product when molasses is treated to bring out ethyl alcohol or denatured spirit. Both press mud and spent wash are exempted from duty by virtue of certain notifications. Bio-compost is the mixture of two waste products viz., press-mud and spent wash and is marketed by the assessee. What is to be seen is as to whether such final product had emerged by using any cenvated inputs either in or in relation to such manufacture of final product. As we have already found that no cenvated inputs or chemicals were used either in or in relation to the manufacture of such exempted final product viz., bio-compost fertilizer, we are of the view that demand made by the Revenue is unsustainable.
6. In view of the above, I set aside the impugned order and allow the appeal with consequential relief to the appellant.
(Pronounce in the open Court) (Archana Wadhwa) Member (Judicial) Jyoti* ??
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