Order date – 30 November 2022

Facts –

• The Appellant, Purna Sahakari Sakhar Karkhana Ltd. are manufacturer of sugar and molasses and during the process of manufacturing sugar & molasses byproducts bagasse, press mud, boiler ash were generated which, as per the appellants, are nothing but waste/residue/refuse. They sold the aforesaid by-products/ waste in the market.
• Three show cause notices were issued demanding amount equal to 5% or 6% of sale value of Press mud & Boiler Ash for violation of the provisions of Rules 6(2) & 6(3) ibid along with interest and penalty.
• Being aggrieve the appellant had filed an appeal

Issue –

• Whether in view of amendment to Rule 6(3) of Cenvat Credit Rules, 2004 vide notification dated 01.03.2015, the appellant is liable to pay @5% /6% of the sale value of waste or by-products which are exempted?

Order –

• The Tribunal relied on the decision of the Hon’ble Supreme Court in the matter of DSCL Sugar Ltd. while considering the amended definition of excisable goods and manufacture has laid down that that pressmud is agricultural waste of sugarcane and the waste & residue of agricultural products during the process of manufacture of goods cannot be said to be result of any process.
• It was also held that there is no manufacturing process involved in pressmud’s production. “Bagasse, pressed and boiler ash” are not ‘goods’ but merely a waste or by-product therefore Rule 6 of the Cenvat Rules shall have no application in the such cases as they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste.
• The Tribunal also relied on the matter of Gujarat Mineral Development Corporation Ltd. vs. CCE&ST, Vadodara-II; it has been held that once it is established that the product in question are by-product then it is settled that in respect of by-product demand under Rule 6 will not sustain.
• Rule 6(3) ibid are applicable only when a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted from whole of duty or chargeable Nil rate of duty using Cenvat inputs.
• The appellant here is not manufacturing bagasse or pressmud or boiler ash. These are by-products only and merely emerge as waste or residue while manufacturing sugar and molasses from sugar cane. None of the by-products falls within the definition of manufacture and in its absence nothing can be demanded from the appellant.
• Hence the appeal is allowed.