Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2015 Supreme(SC) 1724

SUPREME COURT OF INDIA
A.K.Sikri, Rohinton Fali Nariman, JJ.
Union of India & Ors. – Appellant
Versus
M/s. DSCL Sugar Ltd. – Respondent
Civil Appeal No. 3947 of 2013, C.A. No. 3948, 3949, 9332, 10998 of 2013, C.A. No. 1231-1232, 1237, 2761, 2762, 2763, 4488, 6813, 6814 of 2014, Civil Appeal No. 5814 of 2015 @ SLP(C) No. 17236 of 2013, Civil Appeal No. 5815-5816 of 2015 @ SLP(C) No. 22378-22379 of 2013, Civil Appeal No. 5817 of 2015 @ SLP(C) No. 22380 of 2013, Civil Appeal No. 5818 of 2015 @ SLP(C) No. 22817 of 2013, Civil Appeal No. 5819-5821 of 2015 @ SLP(C) No. 23028-23030 of 2013, Civil Appeal No. 5822 of 2015 @ SLP(C) No. 23659 of 2013, Civil Appeal No. 5823 of 2015 @ SLP(C) No. 3340 of 2014, Civil Appeal No. 5824 of 2015 @ SLP(C) No. 3341 of 2014, Civil Appeal No. 5825 of 2015 @ SLP(C) No. 3342 of 2014, Civil Appeal No. 5826 of 2015 @ SLP(C) No. 3344 of 2014, Civil Appeal No. 5827 of 2015 @ SLP(C) No. 6687 of 2014, Civil Appeal No. 5828 of 2015 @ SLP(C) No. 10273 of 2014, Civil Appeal No. 5829 of 2015 @ SLP(C) No. 11958 of 2014, Civil Appeal No. 5830 of 2015 @ SLP(C) No. 3511 of 2015
Decided On : 24-07-2015

Advocates:
Advocate Appeared:
For the Appellant : Mr. K.Radhakrishna, Sr.Adv., Ms. Sunita Rani Singh, Adv., Ms. B.Sunita Rao, Adv., Mr. R.K.Verma, Adv., Mr. B. Krishna Prasad, Adv., Ms. Neelam Chand, Adv., Mr. Anurag, Adv.
For the Respondent: Mr. Manish K. Bishnoi, Adv., Mr. K.Ajit Singh, Adv., Mr. S.K.Bagaria, Sr.Adv., Mr. Narinder Verma, Adv., Mr. Praveen Kumar, Adv., Mr. Vinay Garg, Adv., Dr. Sushil Balwada, Adv., Mr. Rajesh Kumar, Adv., Mr. R.K.Srivastava, Adv., Mr. Krishna Kumar R.S., Adv., Mr. Prakash Kumar Singh, Adv., Mr. Rajiv Dutta, Sr.Adv., Mr. Sanjeev Singh, Adv., Mr. Viashal Gehrana, Adv., Mr. Utsav Trivedi, Adv., for M/s. Karanjawala & Co., Adv., Mr. Rupesh Kumar, Adv., Mrs. Pankhuri Shrivastava, Adv., Mr. Jitin Singhal, Adv., Mr. Prateek Raoka, Adv.

Bagasse, as an agricultural waste and not the result of any manufacturing process, is not subject to excise duty under the Central Excise Act.

Headnote:
Bagasse - Excise Duty - Central Excise Act - Section 2(f), Rule 6(3) of the Cenvat Credit Rules, 2004 - The court considered whether Bagasse, a residue of sugarcane, is subjected to excise duty. The judgment discussed the definition of 'manufacture' under Section 2(f) of the Central Excise Act and the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004. It concluded that Bagasse, being an agricultural waste and not the result of any manufacturing process, is not subject to excise duty.
Fact of the Case:

The appeals were filed by the Revenue to determine whether Bagasse, a residue of sugarcane, is subjected to excise duty. The respondents, manufacturers of sugarcane and molasses, were issued show cause notices demanding excise duty on Bagasse. The High Court allowed the writ petitions, holding that Bagasse, being a waste and not a manufactured product, is not subject to duty.
Finding of the Court:

The court found that Bagasse, classified under a specific sub-heading and attracting nil rate of duty, is not subject to excise duty as it is an agricultural waste and not the result of any manufacturing process. The court dismissed all appeals filed by the Revenue, including those related to Cenvat Credit in respect of electricity, as Bagasse does not attract excise duty.
Issues: The main issue was whether Bagasse is subject to excise duty under the Central Excise Act. The court also considered the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004.
Ratio Decidendi: The court interpreted the definition of 'manufacture' under Section 2(f) of the Central Excise Act and concluded that Bagasse, being an agricultural waste and not the result of any manufacturing process, is not subject to excise duty. It also held that Rule 6 of the Cenvat Rules, 2004, does not apply to Bagasse.
Final Decision: The court dismissed all appeals filed by the Revenue, affirming that Bagasse is not subject to excise duty and that Rule 6 of the Cenvat Credit Rules, 2004, does not apply to Bagasse.

ORDER :

IN BAGASSE MATTERS:

1. CIVIL APPEAL NO. 3947/2013

2. CIVIL APPEAL NO. 3948/2013

3. CIVIL APPEAL NO. 1237/2014

4. CIVIL APPEAL NO. 3949/2013

5. CIVIL APPEAL NO. 6814/2014

6. CIVIL APPEAL NO. 10998/2013

7. CIVIL APPEAL NO. 4488/2014

8. CIVIL APPEAL NO. 6813/2014

9. SLP(C) NO. 23659/2013

10.SLP(C) NO. 6687/2014

11.SLP(C) NO. 22817/2013

12.SLP(C) NO. 23028-30/2013

13.SLP(C) 3341/2014

14.SLP(C)NO. 22378-22379/2013

15.SLP(C) NO. 3511/2015

16.SLP(C) NO.17236/2013

17.SLP(C) NO. 22380/2013

18.SLP(C) NO. 11958/2014

1. Leave granted in all the special leave petitions.

2. All these appeals are filed by the Revenue and the question which arises for consideration is common, namely, whether Bagasse which emerges as residue/waste of sugarcane is subjected to excise duty or not. The excisability of the aforesaid residue depends on the answer to the question as to whether it is manufactured product and falls within the definition of `manufacture’ as contained in Section 2 (f) of the Central Excise Act.

3. The facts in brief are as under:

4. Respondents herein are manufacturer of sugarcane and molasses falling under Chapter sub-heading 17011190 and 17031000 respectively, of the First Schedule to the Central Excise Tariff Act, 1985. In the process of manufacture of sugar, sugarcane is crushed, its juice is extracted and Bagasse emerges as residue/waste of sugarcane.

5. It is not in dispute that Bagasse is otherwise classified under Chapter sub-heading No. 23032000 of the First Schedule to the Central Excise Tariff Act, 1985 and attracts nil rate of duty.

6. However, show cause notices were issued to the respondents herein stating that Bagasse would be subject to duty under the Central Excise Act, 1944, as “other products”. These show cause notices were issued to the respondents in terms of the provision contained in Rule 6(3) of the Cenvat Credit Rules, 2004 demanding various amounts. The said show cause notices were challenged by the respondents filing writ petitions in the High Court of Allahabad. The High Court has allowed these writ petitions holding that Bagasse being a waste and not a manufactured product, no duty is payable thereupon. For arriving at this conclusion, the High Court also have relied upon the judgment of this Court in Balrampur Chini Mills Ltd. in C.A.No. 2791 of 2005 decided on 21.7.2010.

7. The aforesaid judgment was pronounced by this Court related to the period before 2008. In the year 2008 there was an amendment in Section 2(d) as well as in Section 2(f) of the Act which defines ‘excisable goods’ and `manufacture’ respectively. Section 2(d) with the said amendment reads as under:

Section 2(d)

Explanation – for the purposes of this clause, “goods” includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.”

8. As per the aforesaid explanation, “goods” would now include any article, material or substance capable of being bought or sold for consideration and as such goods shall be deemed to be marketable. Thus, it introduce the deeming fiction by which certain kind of goods are treated as marketable and thus excisable.

9. However, before the aforesaid fiction is to be applied, it is necessary that the process should fall within the definition of “manufacture” as contained in Section 2(f) of the Act. The relevant portion of amended Section 2(f) reads as under:

Section 2(f)

(ii) which is specified in relation to any goods in the section or Chapter notes of [The First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or]

(iii) which in relation to the goods specified in the Third Schedule, involves packing or rep

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