Case Law Details
Purna Sahakari Sakhar Karkhana Ltd. Vs The Commissioner of CGST & C. Excise (CESTAT Mumbai)
CESTAT Mumbai held that provisions of rule 6(3) of Cenvat Credit Rules, 2004 are applicable only when the manufacturer is engaged in both manufacture of dutiable and final product. It is not applicable in case of by-products.
Facts-
The appellants 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. It is admitted fact that the appellant sold the aforesaid by-products/ waste in the market.
Accordingly, for the periods December, 2015 to June, 2017 department issued three show cause notices dated 5.1.2018 & 8.1.2018 respectively 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. The Adjudicating Authority vide separate Orders-in-Original dated 09.05.2019 confirmed the demand along with interest and penalty which was upheld by the first appellate authority by way of impugned order.
Conclusion-
Provisions of 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.
But here the manufacturer i.e. appellant here is not manufacturing bagasse or press mud 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. It is not the case anywhere that after the amendment on 1.3.2015 by-products/ waste/residue have been included in the definition of ‘manufacture’ and therefore in my view the provisions of amended Rule 6(3) or Rule 6(2) ibid has no application and resultantly the demand raised by the revenue cannot sustain.
FULL TEXT OF THE CESTAT MUMBAI ORDER
In view of the facts stated in the applications for change of the name filed by the appellants, the same is allowed and the Registry is directed to change the name of the appellants in its records from ‘Purna Sahakari Sakhar Karkhana Ltd.’ to ‘M/s. Kapeeshwar Sugars & Chemicals Ltd.’
2. These appeals have been filed assailing the order dated 11.09.2019 passed by the Commissioner (Appeals), GST & Central Excise, Nashik in Appeal No. 119/2019-20, 120/2019-20 & 121/2019-20 by which the learned commissioner upheld the adjudicating orders and rejected the appeals filed by the appellant.
3. The issue involved herein is 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 i.e. pressmud, bagasse and boiler ash, generated during the manufacturing of sugar/molasses as they failed to maintain separate accounts for dutiable and exempted goods as provided under Rule 6(2)?
4. The appellants 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. It is admitted fact that the appellant sold the aforesaid by-products/ waste in the market. Accordingly for the periods December, 2015 to June, 2017 department issued three show cause notices dated 5.1.2018 & 8.1.2018 respectively 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. The Adjudicating Authority vide separate Orders-in-Original dated 09.05.2019 confirmed the demand along with interest and penalty which was upheld by the first appellate authority by way of impugned order.
5. According to learned Chartered Accountant bagasse/pressmud emerged as waste during the crushing of sugar cane and during the crushing of sugarcane no cenvatable inputs are used and that the bagasse is further burned into boiler and thereafter boiler ash emerges which is also a waste. He further submitted that after purification/filtration of sugarcane juice, the waste remained is Pressmud. Therefore whatever products are in issue, are nothing but waste only. To strengthen his submission, learned Chartered Accountant cited the decision of this Tribunal in Appellant’s own case in the matter of Excise Appeal No. 88942 of 2018; M/s. Purana SSK Ltd. vs. CCE & ST, Nashik; Final Order No. A/85128/2020 dated 29.01.2020 in which the Tribunal on identical issue, allowed the appeal filed by the Appellant while relying upon the law laid down by the Hon’ble Supreme Court in the matter of Union of India vs. DSCL Sugar Ltd.; 2015(322) ELT 769 (SC). Per contra learned Authorised Representative submitted that the Appellants are availing Cenvat Credit on the common inputs/input services, which were used in manufacture of goods cleared on payment of duty as well as the goods which were exempted from duty i.e. press mud, bagasse and boiler ash and cleared the exempted goods without payment of duty. He further submitted that pressmud, bagasse and boiler ash are capable of being sold and appeared to be excisable goods and the tariff rate of duty for pressmud is NIL and therefore it is exempted from whole of the Central Excise duty, but the appellants are not maintaining any separate account of inputs/ input services used for manufacture of both exempted and duty paid goods as provided in Rule 6(2) ibid nor paid an amount equal to 6% of the value as provided under Rule 6(3) ibid as amended vide notification dated 1.3.2015 as in view of the amendment in Rule 6 w.e.f. 1.3.2015 provisions of Rule 6 of Cenvat Credit Rules, 2004 are attracted for the clearance of Bagasse for a consideration even though they are non-excisable.
6. I have heard learned Chartered Accountant appearing for the appellants and learned Authorised Representative appearing for the Revenue and perused the case records including the case laws submitted by the learned chartered accountant. The Hon’ble Supreme Court in the matter of DSCL Sugar Ltd. (supra) 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. There is no manufacturing process involved in pressmud’s production. “Bagasse, pressmud 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.
7. The amendment dated 01.03.2015 in Rule 6 ibid has been wrongly relied upon by the authorities below in confirming the demand. As per Rule 6 ibid as amended, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under it and pressmud/ bagasse/boiler ash will not be covered under the said Rule despite being non-excisable goods since it emerges as agricultural waste or residue and are not manufactured goods. Rule 6 was amended in order 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 safely be concluded that there has to be a manufacturing activity before invoking the aforesaid Rule. The Hon’ble Supreme Court in the matter of DSCL Sugar Ltd.(supra) has laid down that bagasse being an agricultural waste or residue, there could be no manufacturing activity. The aforesaid decision squarely applies on the facts of the instant appeals and apart from bagasse, since pressmud and boiler ash are also emerged as waste, the same also cannot be held to be excisable.
8. The way the learned Commissioner, in the impugned order, tried to distinguish the aforesaid decision of the Hon’ble Supreme Court in DSCL Sugar Ltd. (supra) is completely contrary to judicial discipline, decorum and a very unfortunate scenario. Whatever has been laid down by the Hon’ble Supreme Court is law of the land and the learned commissioner ought not to have commented on its applicability by observing that “DSCL sugar case does not apply squarely to all matters of byproducts”. He did not stop here and even observed that the Hon’ble Supreme Court did not have an occasion to examine the issue as decided by the Hon’ble Supreme Court in two other cases and therefore the aforesaid decision in DSCL sugar is not applicable. As far as I know, not once but in number of decisions in single voice the Tribunal while following the aforesaid decision of the Hon’ble Supreme Court, allowed number of identical issues involving bagasse, pressmud and boiler ash. The Commissioner did not stop here and has even gone to the extent of observing one of the decisions of this Tribunal as ‘not a binding precedent’. This clearly demonstrates lack of acumen of the Commissioner (Appeals) and such officers require periodical training. The principles of judicial discipline require that the orders of the higher appellate authorities and in particular the judgment/orders of the Hon’ble Supreme Court should be followed unreservedly by the subordinate authorities. Constitution of India is above all the statutes in our country and its Article 141 specifically provides that the law declared by the Hon’ble Supreme Court shall be binding on all Courts within the territory of India and since the Commissioner is not above the Courts therefore it binds him as well. Judicial discipline and propriety demands that the Adjudicating Authority or the first Appellant Authority should follow the binding decisions of the Hon’ble Supreme Court/High Court and of course of the Tribunal and should refrain from making comments which are uncalled for.
9. In all the decisions of the Tribunal which has been cited by the learned counsel, a consistent view has been taken that ‘bagasse, pressmud or boiler ash’ which emerges as a waste/by-product, falls outside the scope of Rule 6 ibid. The amendment in Rule 6 might have the effect of treating the by-product to be exempted goods but it cannot result in treating them being manufactured goods, as the nature of bagasse or pressmud or boiler ash remains that of a waste/residue and is not in effect ‘a final product’. In the matter of Gujarat Mineral Development Corporation Ltd. vs. CCE & ST, Vadodara-II; 2022(58) GSTL 49 (Tri-Ahmd) 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. In the matter of Appeal No. E/86537/2018; M/s. Shivratna Udyog Ltd. vs. Commr, CGST & CX, Pune-II, vide Order No. A/87964/2018 dated 20.11.2018 this Tribunal has gone to the extent of holding that no duty can be demanded even on the electricity generated through waste product. The relevant paragraph of the said decision is as under:-
“6. In due obedience to the judicial precedent emerged from the decision of Jakarya Sugars Ltd. post amendment period it can be said that the duty demand made against such sale of surplus electricity manufactured through waste product is not sustainable in law.”
10. Provisions of 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. But here the manufacturer i.e. 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. It is not the case anywhere that after the amendment on 1.3.2015 by-products/ waste/residue have been included in the definition of ‘manufacture’ and therefore in my view the provisions of amended Rule 6(3) or Rule 6(2) ibid has no application and resultantly the demand raised by the revenue cannot sustain.
11. In view of the discussions made hereinabove, the Appeal filed by the Appellant is allowed with consequential relief, if any, as per law.
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