Facts of the case: M/s. Kichha Sugar Company Ltd., is engaged in manufacture of VP Sugar and molasses was registered under Central Excise and availing credit of duty paid on inputs, capital goods and input services used in manufacture of their final products under Rule 3 of Cenvat Credit Rules, 2004 (CCR). Further the assessee cleared Bagasse and press-mud as by-products by the assessee for a consideration. The assessee received a show cause notice with a demand as recovery of Central Excise Duty amounting to Rs.12,22,586/- & Rs.16,53,248/- on the sale of said bagasse and press-mud in terms of Rule 6(3)(i) and erstwhile Rule 6(3)(a) of CCR read with Section 11A of Central Excise Act, 1944 (CEA).
Observation: On looking at the fact of the case CESTAT observed and referred to SC ruling in case of Union of India vs. DSCL Sugar Ltd. [TS-562-SC-2015-EXC] wherein it has been held that, “products like bagasse and press-mud do not qualify the definition of Section 2F of CEA and as such are not being a manufacture. These are only an agricultural waste and residue which itself is not the result of any process and in the absence of manufacture, there cannot be any excise duty”. SC held that since it is not a manufacture, Rule 6 of the CENVAT Credit Rules shall have no application. Further, hon’ble CESTAT observed that said rule was amended w.e.f. March 1, 2015 by inserting an Explanation providing that “exempted goods or final products as defined in clauses (d) and (h) of Rule 2 shall include non-excisable goods cleared for a consideration from the factory”.
Held: In the Case of M/s. Kichha Sugar Company Ltd. vs. CGST CC & C.E., Dehradun the Hon’ble CESTAT held that the condition for Rule 6 is still, “obligation of a manufacturer or producer of final products”, it doesn’t extend to by- products released during the process of manufacture of main product that too without involvement of any such activity, which may be called as manufacture. Further, it held that irrespective of the amendment, there arises no liability upon the assessee to pay the duty as demanded for the period w.e.f. September, to February 2015 nor for reversal of credit as demanded for period June 2015 to March 2016.
Citation: TS-604-CESTAT-2018-EXC