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x) Admittedly, both press mud and spent wash are wastes emerged during the process of manufacturing sugar. So long as bio-compost is not the final product of the sugar industry and so long as it is not produced out of cenvated inputs, it does not come under the description of final products for the purpose of invoking Rule 57CC.
xi) When two waste materials arise, inevitably, during the process of manufacture of final product viz., sugar, the mixture of such waste materials cannot be said to have been produced or manufactured from the cenvated inputs.

13. Keeping in mind the above mandatory requirement to invoke Rule 57CC, let us consider the facts of the present case to find out as to whether the demand made by the Revneue is sustainable or not. Admittedly, the first respondent assessee is the manufacturer of sugar, molasses and Denatured Ethyl Alcohol, which are all dutiable final products and the cenvated credit inputs were used only one time by the first respondent assessee at the time of manufacturing of sugar. It is also seen that "press mud" and "spent wash" emerged as wastes during the course of manufacturing of sugar and Denatured Ethyl Alcohol. It is also admitted by the Revenue that those two products viz., "spent wash" and "press mud" were treated together to manufacture the bio-compost fertiliser. It is not the case of the Revenue that after the emergence of these two wastes viz., spent wash and press mud, further cenvated inputs or chemicals have been added or used by the manufacturer into those two wastes to manufacture bio-compost fertiliser. On the other hand, it is their contention, based on the lab report, that spent wash contained certain chemicals such as chlorides, sulphides, di-phosphates, potassium, sodium and nitrogen. Consequently, it is their case that the final product viz., bio-compost fertiliser which is sold under the name of "Farm boon" and "Garden bloom" also contained those chemicals. Thus, based on such lab report, the Revenue sought to project its case as though the exempted final product viz., bio-compost fertiliser was also manufactured by using the cenvated credit inputs or chemicals.

Findings:-

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 manufatuer of final products ends with the emergence of those final products along with inevitable wastes. Their usage cannot be traced beyond the first degree. The same inputs cannot be considered to have been utilised 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.

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 sugar cane 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.