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2026 Supreme(Online)(CESTAT) 2160
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH : AHMEDABAD
Ajaya Krishna Vishvesha, Judicial Member, Satendra Vikram Singh, Technical Member
VADODARA-II – Appellant
Versus
SHREE KHEDUT SAHAKARI KHAND UDYOG MANDLI LIMITED – Respondent
EXCISE Appeal No. 10258 of 2020-DB | EXCISE Appeal No. 10259 of 2020-DB
For the Appellants/Petitioners: A R Kanani
For the Respondents: Rahul Gajera
Bagasse, being an agricultural waste/residue and not a manufactured product, does not fall under the definition of 'exempted goods' for the purpose of credit reversal under Rule 6 of the Cenvat Credit Rules, 2004.
Headnote:The case involves the interpretation of Rule 6 of the Cenvat Credit Rules, 2004, and whether the clearance of 'Bagasse', a by-product of sugar manufacture, necessitates the reversal of Cenvat credit. The Revenue contended that under Rule 6(3) of CCR 2004 and Circular No. 1027/15/2016-CX, non-excisable goods cleared for consideration should be treated as exempted goods, requiring a 6% credit reversal. The court found that Bagasse is an agricultural waste and residue, not a manufactured product. The primary issue was whether 'Bagasse' falls within the scope of Rule 6 of the Cenvat Credit Rules, 2004. The court reasoned that since Bagasse is not the result of any manufacturing process as defined under Section 2(f) of the Central Excise Act, it cannot be classified as 'manufactured goods' or 'exempted goods'. Consequently, the court held that Rule 6 has no application to waste products that emerge inevitably during the manufacture of the final product. Consequently, the appeals filed by Revenue are dismissed. The impugned orders passed by learned Commissioner (Appeals) are upheld.
| Table of Content |
|---|
| 1. revenue demand for cenvat credit reversal on bagasse clearance. (Para 1 , 2) |
| 2. arguments on whether bagasse is a manufactured product or waste. (Para 3 , 4) |
| 3. judicial consensus that bagasse is non-excisable waste. (Para 5) |
| 4. dismissal of revenue appeal based on established legal position. (Para 6) |
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 2
EXCISE Appeal No. 10258 of 2020-DB
[Arising out of Order-in-Appeal No. VAD-EXCUS-002-APP-302-2019-20 dated 30.08.2019
passed by Commissioner (Appeals), CGST & CE, Vadodara]
Commissioner, CGST & CE, Vadodara …. Appellant
CGST & Central Excise, Commissionerate, VadodaraII,
Aarkee Garba Ground, Nr. Telephone Exchange,
Subhanpura, Vadodara - 390023
VERSUS
M/s. Shree Khedut Sahakari Khand Udyog .... Respondent
Mandli Limited
Pandvai,, Taluka Hansot, Distt. Bharuch, Gujarat
WITH
EXCISE Appeal No. 10259 of 2020-DB
[Arising out of Order-in-Appeal No. VAD-EXCUS-002-APP-302-2019-20 dated 30.08.2019
passed by Commissioner (Appeals), CGST & CE, Vadodara]
Commissioner, CGST & CE, Vadodara …. Appellant
CGST & Central Excise, Commissionerate, VadodaraII,
Aarkee Garba Ground, Nr. Telephone Exchange,
Subhanpura, Vadodara - 390023
VERSUS
M/s. Shree Khedut Sahakari Khand Udyog .... Respondent
Mandli Limited
Pandvai,, Taluka Hansot, Distt. Bharuch, Gujarat
APPEARANCE :
Shri A R Kanani, Superintendent (AR) for the Appellant-Revenue
Shri Rahul Gajera, Advocate for the Respondent-Assessee.
CORAM:
HON’BLE DR. AJAYA KRISHNA VISHVESHA, MEMBER (JUDICIAL)
HON’BLE MR. SATENDRA VIKRAM SINGH, MEMBER (TECHNICAL)
DATE OF HEARING : 17.03.2026
DATE OF DECISION: 17.06.2026
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Appeal Nos. E/10258-10259/2020
FINAL ORDER NO. 10359-10360/2026
DR. AJAYA KRISHNA VISHVESHA :
These appeals have been preferred by Revenue against the impugned
Orders-in-Appeal dated 30.08.2019 through which the learned
Commissioner allowed appeals filed by the Assessee and set-aside the
Order-in-Original dated 11.02.2019 passed by the Adjudicating Authority
confirming demand of Central Excise duty of Rs. 30,28,338/- and Rs.
67,33,011/- alongwith interest and penalty of 6,73,301/- and Rs. 3,02,824/-
respectively.
2. The facts of the case, in brief, are that during audit, it was noticed that
the assessee was clearing by-product ‘Bagasse’ falling under tariff item
23032000 of Central Excise Tariff Act, 1985 generated during manufacture
of sugar, without payment of duty under commercial Bills/Invoices. They are
not maintaining Central Excise statutory accounts about
production/generation and clearance of the said product and have also not
shown the same in their ER-1 returns. On scrutiny of CENVAT account, it
was noticed that they have availed Cenvat Credit of the service tax paid on
various input services like Telephone Service, Security service, Maintenance
& Repair service, Sales Commission service, Business Auxiliary Service etc.,
which are used for manufacture of both dutiable as well as not dutiable
goods. However, they have not maintained separate accounts for receipt,
consumption and inventory of input services meant for use in the
manufacture of dutiable final products and exempted goods. The assessee
has made clearance of 62455.40 MT of ‘Bagasse’ valued at Rs.
11,22,16,851/- during the period from March-2016 to January-2017. As per
clause (1) of Rule 6, sub-rule (3) of Cenvat Credit Rules, 2004 as amended
(hereinafter referred to as CCR 2004), a manufacturer, opting not to
maintain separate records, shall pay an amount equal to 6% of the value of
exempted goods.
2.1 As per department, bagasse, which is non-excisable goods, cleared for
a consideration from the factory of the assessee, is required to be treated
like exempted goods for the purpose of reversal of credit, in terms of Rule 6
of CCR 2004 with effect from 01.03.2015 read with Circular No.
1027/15/2016-CX dated 25.04.2016. The assessee, alleged to have
contravened the provisions of Rule 6(3) of CCR 2004 as they neither
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Appeal Nos. E/10258-10259/2
