By TIOL News Service

BANGALORE, OCT 18, 2013: THE applicant has filed this application for waiver of pre-deposit of service tax of Rs. 1,29,06,397/-, interest and penalty. The issue involved in the present case is already settled in the case of Shree Renuka Sugars Ltd. vs. Commissioner of Central Excise, Kolhapur (2013-TIOL-457-CESTAT-MUM). Hence appeal is being taken up for hearing.

The applicants are engaged in the manufacture of sugar and molasses. For the manufacture of sugar, sugarcane is crushed and ‘bagasse' is generated as waste in the course of manufacture of sugar. Revenue is of the view that the applicant has availed credit in respect of common inputs used in or in relation to manufacture of final product cleared on payment of duty as well as without payment of duty. The applicant had not maintained separate record regarding inputs, therefore, the applicants are liable to pay 5% / 10% of the price of ‘bagasse' which was cleared without payment of duty.

The applicant relied upon the decision of the Tribunal in the case of Shree Renuka Sugars Ltd. vs. Commissioner of Central Excise, Kolhapur (2013-TIOL-457-CESTAT-MUM) and the decision of the Hon'ble High Court of Judicature at Allahabad in the case of Balrampur Chini Mills Ltd. vs. Union of India & others in Writ Petition No. 11791 (M/B) of 2010 - 2013-TIOL-557-HC-ALL-CX. The contention of the applicant is that the issue is settled in favour of the manufacturers of sugar.

Learned Authorised Representative (AR) on behalf of Revenue relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Sales Tax, Bombay vs. Bharat Petroleum Corpn. Ltd. 2002-TIOL-523-SC-CT-LB and submitted that acid sludge arising in the course of refining of crude oil into kerosene and cotton waste arising in the course of manufacture of cotton yarn/fabrics are by-products arising regularly and continuously and also sold regularly from time to time. Therefore, both are to be treated as intended manufacture and eligible for set-off of entire tax paid on raw materials and not on proportionate basis as per Rules framed under the Bombay Sales Tax Act, 1959.

The Tribunal found that the Tribunal in the case of Shree Renuka Sugars Ltd. (supra) after taking into consideration of the decision of the Hon'ble Supreme Court in the case of CCE vs. Shakumbhari Sugar & Allied Industries Ltd. 2003-TIOL-275-CESTAT-DEL and taking into consideration of the Hon'ble Allahabad High Court decision in the case of Balarampur Chini Mills Ltd. (supra), had set aside the demand which was made on the same grounds. In respect of the decision of the apex court in the case of Bharat Petroleum Corpn. Ltd. (supra) relied upon by learned AR, the same is in respect of Bombay Sales Tax Act and the finding is that the acid sludge and cotton waste are by-products, hence the ratio of this decision is not applicable in the facts of present case. We find that ratio of the decision of the Tribunal in the case of Shree Renuka Sugars Ltd. (supra) which is in respect of same facts is applicable of the present case.

In view of the above decision in the case of Shree Renuka Sugars , the impugned order is set aside after waiving the pre-deposit of dues and the appeal is allowed. Stay petition and appeal are allowed.

(See 2013-TIOL-1537-CESTAT-BANG)