Case Law Details
Commissioner of Central Excise and Service Tax Vs Barmalt Malting India Private Limited (CESTAT Chandigarh)
Material Facts
The respondent is engaged in the manufacture of barley malt and malt extract and avails CENVAT credit under the CENVAT Credit Rules, 2004. During the manufacturing process, waste/residual products such as wet bhoosi, chilka, dundli and malt sprouts arise and are sold in the market.
AG Audit observed that these waste/residual products were cleared at a nil rate of duty during the period from May 2008 to June 2015. Consequently, several show cause notices were issued alleging that the respondent was required to reverse proportionate CENVAT credit or pay an amount under Rule 6(3) of the CENVAT Credit Rules, 2004. The notices alleged that these residual products were excisable or exempted goods within the meaning of Section 2(d) of the Central Excise Act, 1944.
The respondent denied the allegations.
Procedural History
The adjudicating authority, by a common Order-in-Original dated 26.08.2016, dropped the demand of Rs.96,59,837 relating to the period June 2012 to February 2015. It held that the waste/residual products were non-excisable goods and that Rule 6 of the CENVAT Credit Rules, 2004 was not applicable to such waste/residual products prior to 01.03.2015. It also relied upon the Supreme Court’s decision in Union of India Vs DSCL Sugar Ltd.
The Department appealed before the Commissioner (Appeals), who upheld the Order-in-Original and maintained the dropping of the demand.
The Revenue thereafter filed the present appeal before CESTAT Chandigarh.
Legal Issues
- Whether wet bhoosi, chilka, dundli, malt sprouts and similar residual products arising during manufacture were liable to excise duty.
- Whether the respondent was required to reverse CENVAT credit or make payment under Rule 6 of the CENVAT Credit Rules, 2004 in respect of such residual products.
Relevant Statutory Provisions
- Section 2(d) of the Central Excise Act, 1944.
- Rule 6(1) and Rule 6(3) of the CENVAT Credit Rules, 2004.
Revenue’s Submissions
The Revenue contended that:
- The lower authorities failed to properly appreciate the provisions of the Act.
- By virtue of the explanation to Section 2(d) of the Central Excise Act, goods include any article, material or substance capable of being bought and sold, and therefore wet bhoosi, chilka, dundli and similar products satisfied the definition of “goods”.
- The residual products were classifiable under Chapter 23024000 of the Central Excise Tariff and attracted a nil rate of duty.
- Even if treated as non-excisable goods, the procedure prescribed under Explanations 1 and 2 to Rule 6(1) of the CENVAT Credit Rules, 2004 was required to be followed.
Respondent’s Submissions
The respondent submitted that:
- The issue stood concluded by the Supreme Court’s decision in Union of India Vs DSCL Sugar Ltd., wherein it was held that bagasse is not a manufactured product and Rule 6 of the CENVAT Credit Rules, 2004 has no application.
- The issue had also been settled in the respondent’s own case by the Punjab and Haryana High Court, which dismissed the Department’s appeal.
Tribunal’s Findings and Reasoning
The Tribunal observed that the issue for determination was whether wet bhoosi, chilka, dundli, malt sprouts and similar products were liable to excise duty.
It found that the issue was no longer res integra and stood settled by the Supreme Court in Union of India Vs DSCL Sugar Ltd., which had been relied upon by both lower authorities while setting aside the demand.
The Tribunal also noted that the issue was covered by the Punjab and Haryana High Court’s decision in the respondent’s own case.
Following the ratio of these decisions, the Tribunal found no infirmity in the impugned order.
Final Ruling
The Tribunal upheld the order of the Commissioner (Appeals), which had affirmed the Order-in-Original dropping the demand of Rs.96,59,837.
The Revenue’s appeal was dismissed.
Cases Discussed
- Commissioner of Central Excise and Service Tax Vs Barmalt Malting India Private Limited (Punjab & Haryana High Court), 2018 (1) TMI 490 (P&H -HC)
- Union of India Vs DSCL Sugar Ltd. (Supreme Court of India), 2015 (322) ELT 769 (SC)
SEO Titles (Five Alternatives)
- Revenue Appeal Against Dropping Rule 6 CENVAT Demand on Malt Waste Dismissed: CESTAT Chandigarh
- Demand on Wet Bhoosi, Chilka and Malt Sprouts Under Rule 6 Upheld as Dropped: CESTAT Chandigarh
- Rule 6 CENVAT Demand on Residual Products Rejected, Revenue Appeal Dismissed: CESTAT Chandigarh
- Dropping of CENVAT Demand on Wet Bhoosi and Malt Waste Upheld: CESTAT Chandigarh
- No Rule 6 Liability on Wet Bhoosi and Malt Residual Products, Revenue Appeal Dismissed: CESTAT Chandigarh
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal filed by the Revenue is directed against the impugned order dated 25.05.2017 passed by the Commissioner (Appeals), Central Excise, Gurgaon, whereby the learned Commissioner has dropped the demand.
2. Briefly the facts of the present case are that the respondent is engaged in the manufacture of Barley Malt and Malt Extract and is availing CENVAT credit benefit under the provisions of CENVAT Credit Rules, 2004. During the course of manufacture of final products, certain waste/residual namely Wet Bhoosi, Chilka, Dundli etc. arise and are sold in the market for consideration. The AG Audit observed that during manufacture of final product the respondent cleared Wet Bhoosi, Chilka, Dundli, Malt Sprouts etc as waste at NIL rate of duty which were generated during the course of manufacture of their final product. Number of Show Cause Notices were issued for the period May 2008 to June 2015 alleging that the respondent cleared the aforesaid goods at NIL rate of duty and therefore was required to reverse proportionate CENVAT credit or pay amount under Rule 6(3) of the CENVAT Credit Rules, 2004. It was alleged that the said residual products are excisable/exempted goods in view of Section 2(d) of the Central Excise Act, 1944 and therefore liable for reversal/payment under Rule 6 of CCR, 2004. The respondent denied all the allegations made in the SCNs. After following the due process, the adjudicating authority vide a common Order-in-Original dated 26.08.2016 dropped the demand amounting to Rs.96,59,837 pertaining to the period June 2012 to February 2015 by holding that waste/residual products are non-excisable goods and prior to 01.03.2015 Rule 6 of CCR, 2004 was not applicable upon such waste/residual. It was further held by the adjudicating authority that the said waste/residual is not classified in Central Excise Tariff and by placing reliance upon the judgment of Hon’ble Supreme Court in the case of Union of India Vs DSCL Sugar Ltd [2015 (322) ELT 769 (SC)] the original authority dropped the demand. Aggrieved by the said order, the Department filed the appeal before the Commissioner (Appeals) who upheld the said Order-in-Original. Hence, the present appeal filed by the Department.
3. Heard both the parties and perused the material on record.
4. The learned Authorized Representative for the department submits that orders passed by both the lower authorities are not sustainable in law as the same have been passed without appreciating the provisions of the Act and the judgements relied upon by the respondent. He further submits that as per the explanation under section 2(d) of Central Excise Act, 1944, goods include any article, material or substance which is capable of being bought and sold goods i.e. wet bhoosi, chilka, dundli etc satisfy the definition of “goods”. He further submits that the residual products are classifiable under Chapter 23024000 of the Central Excise Tariff Act, 1985 and are chargeable to NIL rate of duty. He further submits that even if the goods are considered to be non-excisable, the procedure in terms of Explanation 1 and 2 to Rule 6(1) of CCR, 2004 is required to be followed.
5. On the other hand, learned Counsel for the respondent submits that this issue is no longer res integra and stands settled by the judgment of the Hon’ble Supreme Court in the case of Union of India Vs DSCL Sugar Ltd. reported (supra), wherein it has been categorically held by the Hon’ble Supreme Court that the bagasse is not a manufactured product and consequently, Rule 6 of CCR, 2004 has no application. He further submits that in the respondent’s own case, the issue has been settled by the Hon’ble High Court of Punjab and Haryana reported as 2018 (1) TMI 490 (P&H -HC) by dismissing the Department’s appeal.
6. After considering the submissions made by both the parties and perusal of the material on record, we find that the issue involved in the present case is whether the impugned products namely wet bhoosi, chilka, dundli, malt sprouts etc are liable to excise duty or not? Further, we find that this issue is no longer res integra and stands settled by the Hon’ble Supreme Court in the case of Union of India Vs DSCL Sugar Ltd. (supra) which has been followed by both the lower authorities by setting aside the demand. Further, this issue is also covered by the Hon’ble High Court of Punjab and Haryana in the respondent’s own case as cited above. Therefore, by following the ratios of the said decisions, we do not find any infirmity in the impugned order and the same is upheld by dismissing the appeal of the Department.
(Operative part of the order pronounced in the open court)
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