“Bagasse, Pressmud and boiler ash are not final goods” but merely a waste or by-product-CESTAT denies Credit [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai has denied credit upon bagasse, pressmud and boiler ash because which are not final goods but merely a waste or by-product

The appellants Purna Sahakari Sakhar Karkhana Ltd are manufacturer of sugar and molasses. During the process of manufacturing sugar & molasses by products bagasse, press mud, boiler ash were generated which are waste. Appellant sold the waste in the market.

December, 2015 to June, 2017 department issued three show cause notices dated 5.1.2018 & 8.1.2018 respectively demanding amount equal to 5% or 6% of sale value of Press mud & Boiler Ash for violation of the provisions of Rules 6(2) & 6(3) ibid along with interest and penalty. Against the order made by the department appellant filed the appeal.

D.R.Gadekar, Chartered Accountant for the appellant contented that bagasse/pressmud is considered as waste of sugarcane. During the crushing of sugarcane no cenvatable inputs are used and that the bagasse is further burned into boiler and thereafter boiler ash emerges which is also a waste. Therefore whatever products are in issue, are nothing but waste only.

Xavier Mascarenhas, for the respondent contented that the Appellants are availing Cenvat Credit on the common inputs/input services, which were used in manufacture of goods cleared on payment of duty as well as the goods which were exempted from duty i.e. press mud, bagasse and boiler ash and cleared the exempted goods without payment of duty.

After considering the both contention the single bench Consisting Ajay Sharma, the Judicial Member observed that Rule 6(3) ibid are applicable only when a manufacturer is engaged in the manufacture of any final product. Therefore Appellant did not manufacturing bagasse or pressmud or boiler ash. These are by-products only and merely emerge as waste or residue while manufacturing sugar and molasses from sugarcane. These by products are not fall within the definition of manufacturing products.

To Read the full text of the Order CLICK HERE

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