Excisability of bagasse and press mud.

PJ/Case Law/2014-15/2400

Case:- COMMISSIONER OF C. EX., LUCKNOW V/S KISAN SAHAKARI CHINI MILLS LTD.

Citation:-2014(302) E.L.T. 346 (ALL.)

Brief facts:- The issue pertains to excisability of bagasse and press mud. The bagasse is obtained in the course of manufacture of sugar out of sugarcane may find mention in the schedule to the central excise tariff, but it does not become a final product merely on such fact because bagasse is nothing but waste and cannot be regarded a final product in terms section 3 of Central Excise Act, 1944. Bagasse is agricultural waste of sugarcane, though marketable, duty cannot be imposed because no manufacturing activity is involved.

Respondent’s contentions:- The assessee submits that the controversy in question is no more . It has been settled by the division bench of this court while deciding he writ petition no.11791 (m/b) of 2010, Balrampur Chini Mills Ltd. v. Union of India and Others by order dated 18-05-2012 [2014 (300) E.L.T. 372 (ALL.)] that Bagasse is a waste product and no more duty will be imposed over it. Further, Bagasse and ‘press mud ‘ are not final products of the manufacturer.

The said finding has also been followed in the cases of Central excise commissioner v. Mahalakshmi sugar mills and commissioner, central excise, meerut v. U.P. state sugar corporationand held that the Bagasses and press mud are not final products of the manufacturer. Accordingly, recovery of 8% amount of the waste Bagasses and press mud cleared by the said sugar company was held to be not justified.

“Thus, it is not in dispute that the bagasses is an agricultural waste of sugarcane, though marketable product, but the duty cannot be imposed as it dose not involve any manufacturing activity simply by adding an explanation under section 2(d) of the central excise act,1944, whereby the definition of ‘goods’ has been defined will not make bagasses, which, as stated here in above, is an agriculture waste to be a dutiable item and the Chief Commissioner vide Circular dated 3-10-2009 nullified the judgement and order dated 21-7-2010 rendered in civil appeal no. 2791 of 2005.
Bagasses is classified under sub- heading 2303 20 00 of central excise tariff act. In view of the judgement of apex court in civil appeal no. 2791 of 2005, Commissioner Of Central Excise v. Balrampur Chini Mills, Conda, decided on 21-10-2010, the circular of the chief commissioner, central excise, Lucknow as well as Circular Of Central Board Of Excise and Custom are liable to be quashed which is the basis for issuing the demand.

In the impugned notice dated 27-9-2010, it has been mentioned that as per rule 6 of the CENVAT credit is availed on the inputs which are used in the manufacture of both dutiable and final products, then an amount equal to 10% (up to 6^th July , 2009) or 5% (w.e.f. 7-7-2009) of the sale value of exempted final products is required to be paid. Therefore, neither the penalty nor the interest can be charged from the petitioner, in view of the fact that the petitioner are not liable to duty either by payment or by reversal in respect of bagase sold by petitioner. As the petitioner have paid the entire duty and interest under protest, the entire deposited amount shall returned to them.

In the view of above discussion, all the writ petitions are allowed and impugned Circular dated 28-10-2009, issued by Central Board of Excise and Custom, the Circular dated 3-10-2009 issued by the central excise, U.P., Lucknow and demand notice dated 24/27-9-2010 issued by The Joint Commissioner, Customs Central Excise and Service Tax are hereby quashed. As some of the petitioner deposited the entire duty and interest under protest, it should be returned to them, within a maximum period of four weeks, from the date of presentation of a certified copy of the order.”

Reasoning of judgment:- Relevant portion of the order and operative portion of the judgment Balrampur Chini Mills Ltd. v. Union of India and Others by order dated 18-05-2012 [2014 (300) E.L.T. 372 (ALL.)] are reproduced as under:

“the law is well settled that ‘Bagasse’ generated from the crushing of the sugarcane is neither manufactured goods nor manufactured final product, but it is a residue/waste. The apex court while dismissing the civil appeal preferred y the department in case of CCE V.SHAKUMBHARI SUGAR &ALLIED INDUSTRIES LIMITED [2005 (189) E.L.T. 62 (S.C.)], upload the findings recorded by the tribunal in case of CCE V. SHAKUMBHARI SUGAR AND ALLIED INDUSTRIES LIMITED, whereby it has been held that the ‘Bagasse’ obtained during the course of manufacture of sugar out of sugarcane may find an entry in schedule to the central excise tariff, but a waste obtained during manufacture of waste cannot be regarded as a final product exempt from duty for invoking provisions of rule 57CC of central excise rules, 1944.”

It was concluded by the High Court that since the controversy in question has been settled at rest by the aforesaid judgment and order of this court, there appears to be no reason to admit the present appeal and decide the issue afresh. The judgment and order passed by the tribunal dose not suffer from any impropriety or illegality.

The instant appeal being devoid of merit is hereby dismissed.

Decision:- The appeal is dismissed.

Comment:- The essence of the case is that bagasse is waste of sugarcane and though it is marketable, duty cannot be imposed on it because no manufacturing is involved in it. The same view was taken by the Allahabad High Court decision in the case of Balrampur Chini Mills Ltd. v. Union of India and Others.

Prepared by:- Monika Tak

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PJ/Case Law/2014-15/2400

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