In a recent case, the Allahabad bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that bagasse is not a manufactured item and is not dutiable. Further held that it does not attract Rule 6(3) of the CENVAT Credit Rules, 2002 ( CCR 2004 ).
Daurala Sugar Works, the appellant/assessee is in the business of manufacturing excisable goods, viz., cane sugar and molasses, falling under Chapter 17 of the Central Excise Tariff Act, 1985. The appellant is availing CENVAT credit on input, input services, and capital goods used in the manufacture of these excisable goods in their factory.
The appellant is also generating electricity in their factory using bagasse generated in-house as fuel. Bagasse arises from the crushing of sugarcane in the millhouse of the sugar plant. The bagasse is not a manufactured product and is merely agricultural waste.
The appellant became entitled to consequential relief in respect of the proportional CENVAT credit of Rs. 39,78,832 reversed by them and appropriated by the Commissioner in the SCN. The appellant filed a refund application claiming a refund in respect of input duty and input service tax credits reversed by them in the past erroneously.
The assessee contended that it was not required to reverse CENVAT credit on inputs and input services that were used in the manufacture of the main excisable goods, viz., sugar and molasses produced by the appellant. The input bagasse, arising as a waste product from the crushing process, is used as fuel in the generation of steam and power.
The single bench of P.K. Choudhary (Judicial Member) has observed that Rule 6(3) of CCR, 2004 broadly gives the assessee two options for reversing Cenvat credit of service tax paid on input services. The first option is to pay 6% of the value of exempted goods or exempted services. The second option is to pay an amount determined as per the formula prescribed under Rule 6(3A).
The tribunal held that bagasse, being only an agricultural waste and not a result of any process, is not covered in the definition of manufacture under Section 2(f) of the Act, and there is no chapter note or section note in the Central Excise Tariff declaration process in respect of bagasse as amounting to manufacture.
The tribunal allowed the appeal of the assessee and held that the amount reversed by the appellant under Rule 6(3) of the CCR was like a revenue deposit.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
