The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no excise duty is payable on bagasse that emerged as waste during sugarcane crushing.
The bench of Vasa Seshagiri Rao (Technical Member) and Ajayan T.V. (Judicial Member) has observed that bagasse generated from the crushing of sugarcane is not a manufactured final product but is only a residue/waste. Bagasse generated during the course of manufacture of sugar does not become a final product although the product is mentioned as an entry in the Schedule to CETA and therefore cannot be regarded as a final product, or an exempted product.
The Appellant/assessee is in the business of manufacturing of Sugar and Molasses and during such process, Bagasse emerged as a bye product at the milling stage which was captively consumed in the co-generation plant for generating electricity which was in turn captively consumed in the sugar plant and also supplied to the grid of the Tamil Nadu Electricity Board (TNEB).
Bagasse, being marketable was also sold to some customers. The Appellant was availing Cenvat credit of duty paid on inputs like lubricating oil, hydrochloric acid and other chemicals and also on inputs services, which were utilised towards payment of duty on Sugar and Molasses.
It appeared to the department that the Bagasse, specified under Tariff Head 2203 2000 of Central Excise Tariff Act, 1985 (CETA) and chargeable to Nil rate of duty, falls within the scope of definition of exempted goods in terms of Rule 2(d) of CCR.
As the Appellant had availed and utilised Cenvat credit without maintenance of separate accounts for manufacture of dutiable and exempted goods as per Rule 6(2) of CCR and had not paid an amount mandated under Rule 6(3)(i) / 6(3)(ii) of CCR, it appeared that the Appellant had contravened the provisions of Rule 6 of CCR.
Therefore, the Show Cause Notices were issued to the Appellant, seeking to recover Cenvat Credit respectively, under Rule 14 of CCR read with Section 11(A) (1) of the ACT along with applicable interest, besides proposing to impose penalty under Rule 15(1) of CCR read with Section 11AC.
The Adjudicating Authority have confirmed the demands proposed in the said SCN’s and imposed equal penalty under Rule 15(1) of CCR.
The tribunal held that the demands raised cannot sustain and requires to be set aside. And so, ordered accordingly. Since the demands themselves could not be sustained, the question of demand of interest and imposition of penalty does not arise.
Case Details
Case Title: M/s. Sakthi Sugars Ltd. Versus Commissioner of GST and Central Excise
Case No.: Excise Appeal Nos. 40479 to 40482 of 2015
Date: 02.01.2025
Counsel For Appellant: M.N. Bharathi
Counsel For Respondent: O.M. Reena
