Custom, Excise & Service Tax Tribunal
Simbhaoli Sugar Ltd vs Noida on 19 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
REGIONAL BENCH : ALLAHABAD
COURT No. I
APPEAL No. E/70496/2018-EX[SM]
(Arising out of Order-in-Appeal No. NOI-EXCUS-001-APP-1256-17-18
dated 06/10/2017 passed by Commissioner (Appeals), Central Tax
Commissionerate, Noida)
M/s Simbhaoli Sugar Ltd. Appellant
Vs.
Commissioner of Central Excise, Noida Respondent
Appearance:
Shri Rajesh Chhibber (Advocate) for Appellant Shri Gyanendra Kumar Tripathi (Asstt. Commr.) AR for Respondent CORAM:
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Date of Hearing : 09/07/2018 Date of Decision & Pronouncement : 19/07/2018 FINAL ORDER NO. - 71567/2018 Per: Archana Wadhwa After hearing both the sides, I find that the appellant is engaged in the manufacture of sugar and molasses and were availing the benefit of Cenvat credit of duty paid on inputs, capital goods as also input services.
2. During the course of manufacture of sugar bio- manure arises as a byproduct, which is being sold by the assessee against consideration. As bio-manure is 2 APPEAL No. E/70496/2018-EX[SM] chargeable to nil rate of duty, the Revenue entertained a view that they are required to pay an amount of 6% of the value of the same in terms of the provisions of Rule 6(3)(1) of Cenvat Credit Rules, 2004, inasmuch as they have availed Cenvat credit in respect of common inputs and input services.
3. Accordingly, proceedings were initiated against them by way of a show cause notice dated 01/04/2016, raising demand of Rs.99,451/- (Ninety nine thousands four hundred fifty one) in respect of bio manure, cleared by the appellant during the period April, 2015 to November, 2015. By taking into consideration the amended provisions of Rule 6(1) of Cenvat Credit Rules, 2004, vide which an explanation was added to the said Rule, the Lower Authorities held that even though bio manure came into existence as a byproduct but the appellant is required to pay 6% of the value of the same in terms of Rule 6(3)(1) of Cenvat Credit Rules and accordingly confirmed the demand along with confirmation of interest and imposition of penalty of identical amount. The order passed by the Original Adjudicating Authority stand confirmed by Commissioner (Appeals) and hence the present appeal. 3 APPEAL No. E/70496/2018-EX[SM]
4. After hearing both the sides, duly represented by Shri Rajesh Chhibber Advocate and Shri Gyanendra Kumar Tripathi (Asstt. Commr.) for Revenue. I note that the Lower Authorities have specifically relied upon the amended Rule 6(1) of the Cenvat Credit Rules, 2004, which, for better appreciation is being reproduced below:-
"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 provision 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."
By reference to the same, Commissioner (Appeals) has observed as under:-
4 APPEAL No. E/70496/2018-EX[SM]
"It is seen that by virtue of amendment brought out in the above rule vide Explanation-1 ibid w.e.f. 01.03.2015, the non-excisable goods or goods chargeable to Nil Rate of duty also came within the purview of exempted goods for the purpose of reversal of amount at the appropriate rate. In other words, Nil rated goods such as Bio Manure, classifiable under Tariff sub-heading No.23032000, which were out of purview of Rule 6(1) ibid prior to 01.03.2015, had been covered under this Rule on or after 01.03.2015 for the purpose of reversal of amount. Undoubtedly, the Hon'ble Supreme Court in the case of Union of India vs. DSCL Sugar Ltd. 2015 (322) E.L.T. 769 (SC) [case laws as relied on by the appellant] discussing Section 2(d) of Central Excise Act, 1944 and Rule 6 of Cenvat Credit Rules, 2004 in the subject matter held that bagasse is an agricultural waste of residue and accordingly there could be no levy of excise duty on manufacture and clearance of such goods. But the fact remains that after pronouncement of the above judgment of the Hon'ble Supreme Court, the law with regard to defining the exempted goods/non- excisable goods has been changed, as aforesaid and by virtue of amendment made in Rule 6(1) of Cenvat Credit Rules, 2004, w.e.f. 01.03.2015, the exempted goods and the goods attracting Nil rate or non-excisable goods shall 5 APPEAL No. E/70496/2018-EX[SM] also be taken into account for the purpose of reversal of amount in respect of inputs/input services used commonly in the manufacture of dutiable as well as exempted goods. There is no dispute over the fact that the subject item i.e. Bio Manure had been cleared for a consideration from the appellant's factory. The CBE & C, in Para 4.1 & 4.2 of its Circular No.1027/15/2016-CX dated 25.04.2016, referring the above amendment made in Rule 6(1) of Cenvat Credit Rules, 2004, w.e.f. 01.03.2015, has clarified that "Consequently, Bagasse, Dross and Skimmings of non-ferrous metals or any such by-product 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 CENVAT Credit Rules, 2004."
5. As is seen from above, Revenue has strongly relied upon the explanation to Rule 6(1). However, it is seen that Rule 6(1) stand amended so as to include the inputs used in relation to the manufacture of exempted goods. As such, it can be seen that the same relates to the manufacture and it can be safely concluded that there has to be a manufacturing activity for invoking Rule 6(3). The Hon'ble Supreme Court in the case of Union of India 6 APPEAL No. E/70496/2018-EX[SM] vs. D.S.C.L Sugar Ltd. 2015 (322) E.L.T. 769 (S.C.) has held that bagasse being an agricultural waste or residue, there could be no manufacturing activity. Similarly bio manure is nothing but a byproduct which necessarily arises during the course of manufacture of the goods and it cannot be said that the same was a manufactured product. If the same was not manufactured, the same cannot be held to be excisable, in which case the amendment carried out would not apply.
6. Otherwise also, I find that the appellant have clarified that no inputs are used prior to emergence of bagasse and spent waste and the molasses which are further used for the manufacture of rectified spirit. If that be so there are no common inputs used in the manufacture of bio manure.
7. In any case, I note that the Revenue has itself treated the bio manure as a byproduct which arises during the course of manufacture of sugar and molasses. If that be so the provisions of Rule 6(3) would not apply as held by the Hon'ble Bombay High Court in the case of Rallies India vs. Commissioner of Central Excise reported as 2015 (319) E.L.T. 680 (Bom.) vide which the Larger Bench decision of the Tribunal was set aside. 7 APPEAL No. E/70496/2018-EX[SM]
8. As such, viewed from any angle, the demand against the appellant is not called for. The same is accordingly set aside and appeal is allowed with consequential relief to the appellant.
(Pronounced in Court on 19/07/2018) Sd/-
(Archana Wadhwa) Member (Judicial) Lks