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2019 (5) TMI 972 - HC - Central ExciseReversal of CENVAT Credit - Bagasse (non-excisable goods) - reversal of credit of input and input services - Rule 6 of the CENVAT Credit Rules, 2004 - amendment in CENVAT Credit Rules dated 01/03/2015 - Circular No.1027/15/2016-CX dated 25/04/2016 - HELD THAT:- Circular dated 25/04/2016 treats Bagasse as an exempted good for the purpose of reversal of credit of input in terms of rule 6 of the CENVAT Credit Rules 2004. The competent authority deciding the claim of the petitioner consequent to the Show Cause Notice, would be bound by the departmental Circular dated 25/04/2016 and he would not have the liberty of disagreeing with the circular issued by Central Board of Excise and Customs. In this view of the matter it would not be efficacious to relegate the petitioner before the competent authority and, there is no hesitation in holding that the writ petition in the present facts and circumstances of the case would be maintainable. Bagasse not to be a manufactured product, and therefore Rule 6 of the CENVAT Credit Rules, 2004 shall have no application, Section 6 (1) has been amended by inserting the 2 Explanations, which the respondent contends is sufficient to include Bagasse within the fold of Section 6, and further to justify the stand for a reversal of CENVAT Credit Rules, 2004 - A perusal of the Explanation 1 to Rule 6 would indicate that it provides that the exempted good and final product as defined in Clause (d) & (h) of Rule 2 shall include non-excisable goods cleared for a consideration from the factory. In absence of Bagasse being a manufactured final product, the obligation of a reversal of CENVAT period under Rule 6 (1) of the CENVAT Credit Rules, 2004 is not attracted. It has also been noticed that Bagasse has always been an “exempted goods” under Rule 2 (d) of the CENVAT Credit Rules, 2004. It has been mentioned in Central Excise tariff heading 2303 20 000 and was subjected to NIL rate of duty. It therefore, fell within the definition of “exempted goods” as defined under Rule 2 (d) and is not a non-excisable good, as mentioned in the impugned Circular - That the Circular dated 25/04/2016 interpreting Explanation 1 to Rule 6 has provided that “consequently, Bagasse, dross and skimmings of nonferrous metal or any such byproduct of waste, which are non-excisable goods and are cleared for consideration from the factory need to be treated like exempted goods for purpose of reversal of credit of input and input services, in terms of rule 6 of the CENVAT Credit Rules, 2004. The circular therefore treating Bagasse to be a non-excisable good, is clearly erroneous, and for this reason also the Circular dated 25/04/2016 is liable to be quashed with regard to Bagasse. In absence of Bagasse being a manufactured final product, the obligation of reversal of CENVAT Credit under Rule (1) of the CENVAT Credit Rules, 2004 is not attracted - The Circular No.1027/15/2016-CX, dated 25/04/2016, contained in Annexure - 1 to the writ petition to the extent that it includes Bagasse under the purview of the reversal of credit of input services in terms of Rule 6 of the CENVAT Credit Rules, 2004. Petition allowed - decided in favor of petitioner.
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