Custom, Excise & Service Tax Tribunal
M/S. Dharani Sugars & Chemicals Ltd vs Cce, Tirunelveli on 16 April, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/391/2012
(Arising out of Order-in-Original No. 4/COMMR/CE/2012 dated 25.4.2012 passed by the Commissioner of Central Excise, Tirunelveli)
M/s. Dharani Sugars & Chemicals Ltd. Appellant
Vs.
CCE, Tirunelveli Respondent
Appearance Shri S. Muthuvenkataraman, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent E/511/2012 (Arising out of Order-in-Original No.5/2012 (C. Ex.) dated 27.9.2012 passed by the Commissioner of Central Excise, Salem) M/s. Subramaniya Siva Cooperative Sugar Mills Ltd. Appellant Vs. CCE, Salem Respondent Appearance Shri Derrick, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent E/40316/2014 (Arising out of Order-in-Original No. 14/CE/COMMR/2013 dated 23.12.2013 passed by the Commissioner of Central Excise, Tirunelveli) M/s. Dharani Sugars & Chemicals Ltd. Appellant Vs. CCE, Tirunelveli Respondent Appearance Shri S. Muthuvenkataraman, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM Honble Shri D.N. Panda, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing / Decision: 16.04.2015 Final Order No. 40422-40424 / 2015 Per D.N. Panda Appeal No. E/391/2012 Learned counsel says that the controversy in this appeal is whether common inputs used by appellant in the course of manufacture of sugar resulting in sugar as well as bagasse and press mud not liable to duty is entitled to CENVAT credit on the inputs used. He explains that the input and output need not have one to one relationship as has been appreciated by the Honble High Court of Madras in para 15 to 17 of the judgment in CCE, Pondicherry Vs. EID Parry (I) Ltd. 2013 (293) ELT 10 (Mad.). Therefore, there cannot be denial of CENVAT credit to the appellant on the common inputs. For the convenience of reading the said paragraphs 15 to 17 are reproduced as under:-
15.?We find force in the submission made by the first respondent-assessee. Certainly, the cenvated inputs were brought into the factory by the assessee for using it in the manufacture of their final products viz., sugar, molasses, Denatured Ethyl Alcohol. Once they use those cenvated inputs at the initial stage and obtain certain final products as well as wastes such as press mud and spent wash, there was no further application or usage of those inputs either in or in relation to the manufacture of final products once again. In other words, the commencement of journey of those cenvated inputs used either in or in relation to the manufacturer of final products ends with the emergence of those final pro-ducts along with inevitable wastes. Their usage cannot be traced beyond the first degree. The same inputs cannot be considered to have been utilized or used even indirectly in the manufacture of disputed item viz., bio-compost fertiliser, especially under the factual circumstances that the same came to be manufactured only by adding those two waste materials together. May be those two waste materials contained the trace of certain chemicals with the characteristics of original inputs. That itself cannot be taken to mean that the product emerged out of those wastes was also manufactured by using those cenvated credit inputs.
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 fertiliser 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 fertiliser, we are of the view that demand made by the Revenue is unsustainable.
2. Against the submission above, Revenue does not have any logical reason to bring out a difference to the finding made by the Honble Madras High Court. Therefore, this appeal is allowed. E/511/2012
3. Learned counsel submits that the outcome of the processes resulted in sugar and bagasse. Bagasse was used for generation of power. It was alleged by Revenue that the electricity generated by appellant not being dutiable goods there shall be denial of CENVAT credit since common input was used to manufacture sugar as well as bagasse. It was submitted on behalf of appellant that electricity generated were sold to Tamilnadu Electricity Board to avail equivalent unit of power at different place of manufacture of appellant.
4. Honble High Court of Allahabad in paragraphs 25 to 27 of the judgment in Gularia Chini Mills Ltd. Vs. Union of India 2014 (34) STR 175 (All.) held that if generation of power by appellant was neither using mineral fuels, mineral oils and products of their distillation, bituminous, substances, mineral waxes etc., the energy so generated from bagasse is not be covered by Chapter 27 of the Central Excise Tariff Act, 1985. Therefore, there cannot be denial of CENVAT credit. It was the opinion of the Court that the electricity energy not being excisable goods nor its is exempted goods in terms of Rule 2(d) of the CENVAT Credit Rules, 2004, the appellant cannot be denied of the CENVAT credit on the common input used. For the benefit of reading, the above said paragraphs are reproduced below:-
25.?It is not in dispute that petitioners do not avail Cenvat credit on any input and input services used in generation of electricity insofar as this fact has been admitted by the Assistant Commissioner as well as Commissioner, Central Excise, Lucknow vide letters dated 30-1-2013 and 21-2-2013, respectively. In order to become any goods to be an excisable goods, it has to fulfil the following conditions :
(1) Goods must be manufactured;
(2) Must be specified in the First or Second Schedule of the Central Excise Tariff, (3) It must be subjected to tariff.
26.?Admittedly, none of these conditions are attracted in the instant case insofar as electrical energy, which is mentioned in Chapter 27 of the Central Excise Tariff Act, covers only those electrical energy which are generated from mineral fuels, mineral oils and products of their distillation, bituminous, substances, mineral waxes, etc. The electrical energy generated from Bagasse is not covered under Chapter 27. Similarly, Chapter 27 does not cover electrical energy produced by solar power, hydro power, wind power or from bagasse. Therefore, we are of the view that electrical energy is not an excisable goods nor it is exempted goods as defined in Rule 2(d) of the 2004 Rules.
27.?It is also relevant to mention here that Rule 6(1) provides that Cenvat credit shall not allow on such quantity of inputs which is used in the manufacture of exempted goods. For applicability of Rule 2, the following ingredients must exist :-
(i) where a manufacturer avails Cenvat credit on any input (as defined in Section 2(k)
(ii) and manufactures such final products which are chargeable to duty and
(iii) also manufactures such final products which are exempted goods.
5. To the observation and finding of the Honble High Court, Revenue has no material to show that appellant has been unjustly benefited at the cost of Revenue through the process carried out and using common input.
6. In absence of any evidence to show a different reason or rationale against the principle laid down by Honble High Court of Allahabad, appeal is allowed. E/40316/2014
7. The only question in this appeal is that whether the bagasse generated in the course of manufacture of sugar shall disentitle the appellant to the CENVAT credit of the common input used and whether any percentage formula to be applied invoking Rule 6(3) of CENVAT Credit Rules, 2004 to levy on the appellant for common use of input.
8. Paragraphs 18 and 29 of the judgment of Honble High Court of Allahabad in Balrampur Chini Mills Ltd. Vs. Union of India 2014 (300) ELT 372 (All.) provides answer to the above question allowing CENVAT credit. The said paragraphs insofar as that is relevant for this case are reproduced for convenience of reading:-
18.?A perusal of Rule 6(1) clearly shows that the manufacturer has to manufacture both dutiable goods as well as exempted goods. Since bagasse is not manufactured goods but is a waste product which emerges/comes into existence in the process of manufacture of sugar, it is not manufacture of exempted goods.
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29.?Thus, it is not in dispute that the bagasse is an agricultural waste of sugarcane, though marketable product, but the duty cannot be imposed as it does not involve any manufacturing activity simply by adding an explanation under Section 2(d) of the Central Excise Act, 1944, whereby the definition of goods 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.
9. Revenue does not have any material to suggest that those two paragraphs by any means be distinguished. In absence of any such material this appeal is also allowed.
10. In the result all the three appeals are allowed.
(Dictated and pronounced in open court)
(R. PERIASAMI) (D.N. Panda)
Technical Member Judicial Member
Rex
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