TMI Blog2019 (5) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not control the process and prevent the emergence of Bagasse . 4. The petitioner is availing credit of Central Excise Duty held on inputs, input services and capital goods as provided under CENVAT Credit Rules, 2004 for the payment of Central Excise Duty on the final product, namely sugar. That in the process of manufacture of sugar, sugar cane is crushed, its juice is extracted and Bagasse emerges as a residue/waste of the sugar cane which is neither a manufactured product not a final product of the sugar industry. It is further been submitted that there is a fixed proportion of raw material (sugar cane, lubricants, grease etc) that is required to manufacture a particular quantity of sugar; the petitioner cannot use lesser quantity of input/materials so as to avoid the emergence of waste in the form of Bagasse . 5. In the schedule to the Central Excise Tariff Act, 1985, in the six digit tariff, Bagasse is classified under heading 2301.00 with the description Residue and waste from food industries, including Bagasse other ways of sugar manufacturers and oil cakes in the eight digit tariff, it is classified under tariff heading 2303 20 000 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bagasse being a manufactured good, as the nature of Bagasse namely, that it is an agricultural waste or residue and not a manufactured product and therefore despite the aforesaid amendment, and also in light of the ratio laid down by the Hon'ble Supreme Court in the case of Union of India vs M/s DSCL Sugar Ltd and others (supra) remains unaffected, and therefore the petitioner cannot be saddled with the liability of reversal of CENVAT credit. 10. Sri Deepak Seth, appearing on behalf of respondent no. 2 to 4 raised preliminary objection and submitted that the petitioner has challenged the show cause notice dated 24/03/2017, wherein he has full opportunity to place his claim/reply before the respondents who would consider the same and pass necessary orders, and the writ petition in this regard would not be maintainable. It is further submitted that the effect of amendment in Rule 6 of the CENVAT Credit Rules 2004 is only to the effect that for the purposes of Rule 6 the exempted goods or final product as defined in the Clauses (d) (h) of Rule 2 shall include non-excisable goods cleared for a consideration from the factory. This amendment is made vide notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Rules, 2004, Bagasse being a non-excisable goods cleared for consideration from the factory and needs to be treated like exempted good for the purpose of reversal of credit input and input services, and therefore the respondents are bound to follow the circular of the Central Board of Excise and Customs and any argument to the contrary is bound to be rejected, and therefore the petitioner s need not be relegated to the alternative remedy. 14. In the present case by means of circular dated 25th April, 2016 The Central Board of Excise and Customs have interpreted the amendment dated 01/03/2015 of the CENVAT Credit Rules 2004 so as to treat 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 show cause notice has been issued by Asst Commissioner, Central Excise, Faizabad Division, Faizabad relying on the amendment dated 01/03/2015, to the effect as to whether the petitioner was reversing CENVAT Credit Rules, 2004, related with the Bagasse and pressmud after introduction of Notification dated 01/03/2015. The Circular dated 25/04/2015 is a policy decision of the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empty formality or futile attempt . The High Court was, therefore, right in overruling the preliminary objection raised by the respondents. 17. In the instant case the petitioner has challenge the show cause notice which seeks to saddle it with the liability to reverse the CENVAT Credit claimed by it, in the light of the amendment in CENVAT Credit Rules dated 01/03/2015, and further elaborated by means of Circular dated 25/04/2016 which 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. We are inclined to agree with the argument of the petitioner, that relegating them to the competent authority to decide the issue after receiving the reply from the petitioner would be just an empty formality in as much as the argument of the petitioner that despite the amendment dated 01/03/2015 the CENVAT credit claimed by them cannot be reversed in as much as the bagasse not being a manufactured product is out of the purview of Rule 6 of the CENVAT Credit Rules 2004. We are also in full agreement with the argument that the competent authority deciding the claim of the petitioner consequent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x is payable. (3) Notwithstanding anything contained in subrules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options as applicable to him, namely :- i. the manufacturer of the goods shall pay an amount equivalent to five percent of the value of the exempted goods and the provider of output service shall pay an amount equal to six percent of the value of the exempted services; or ii. ............. 20. The union of India amended CENVAT Credit Rules, 2004 with effect from 01/03/2015 by inserting Expression 1 and 2 in Rule 6 (1), which reads as under:- Explanation 1. - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2. - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to manufacture in respect of certain goods, and specifically with regard to Bagasse and held as under:- in the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the section or in the chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of section 2 (f) of the act and the absence of manufacture, there cannot be any Excise duty. Since it is not a manufacture, Rule 6 of the CENVAT Credit Rules 2004, shall have an application rightly held by the High Court. 27. After the aforesaid judgement which has clearly held 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 . 34. In light of the above we are of the considered opinion that 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, and the ratio laid down in the judgement of the Hon'ble Supreme Court in the case of Union of India and others vs M/s DSCL Sugar Ltd and others (supra) still holds the field. Rule 6 of the CENVAT Credit Rules would have no application for reversal of CENVAT Credit in relation to Bagasse . 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, as well as the impugned show cause notice dated 24/03/2017 contained in Annexure - 2, are hereby quashed. 35. The writ petition is accordingly allowed . ..... X X X X Extracts X X X X X X X X Extracts X X X X
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