CX - Brown Sugar is not agri waste - it is residue of manufactured product viz. 'sugar'- brown sugar is also used for human consumption - classification of product under same heading 23.01 as applicable to Bagasse would not alter position about applicability of Rule 6: CESTAT
By TIOL News Service
MUMBAI, OCT 31, 2013: THE appellants are engaged in the manufacture of sugar and availing CENVAT Credit on inputs. During the manufacture of sugar, a residue of manufactured product known as "Brown Sugar" remains. This residue sugar is brown in colour and sucrose content is less than normal/standard sugar. Most of the sugar manufacturing units reprocess and convert the same into standard sugar and clear such sugar on payment of duty. However, sometimes, Brown Sugar is also sold which may be used for reprocessing and converting into normal sugar or used for normal consumption.
The appellant clears "Brown sugar" from the factory at NIL Tariff rate under Chapter heading 23.01 which covers "Residues and from food industries, including bagasse, other waste of sugar manufacture and oil cakes." Since the Appellant availed CENVAT Credit on various inputs but did not maintain separate accounts of inputs used in the manufacture of exempted "Brown Sugar", Revenue demanded an amount of Rs.93,484/- as 8% of sale price of brown sugar under Rule 6 (3)(b) of CENVAT Credit Rules, 2001.
The lower authorities upheld the demand and hence the appellant is before the CESTAT.
It is submitted that Brown Sugar is a waste product; not manufactured goods; non-excisable; beyond the scope of Rule 6(3) of CCR, 2001 and hence 8% of sale price is not required to be paid. Furthermore, bagasse and press mud have been held to be a waste and hence non-manufactured and non-excisable product and Brown Sugar is also classifiable under the same heading 23.01 which covers Baggase.
The Revenue representative argued that Brown Sugar is a manufactured product unlike bagasse which is agriculture waste.
The Bench observed -
"6. We note that Brown Sugar is not an agriculture waste (like Bagasse and press mud) or a waste of an input after its use like HCL but a residue of manufactured product viz sugar not meeting the specification of standard sugar and is brown in colour. This is reprocessed and converted into normal sugar. Under the circumstances it cannot be considered as waste or unmanufactured product, it is residue of manufactured product and can be reprocessed to manufactured product viz. sugar 8% amount is correctly demanded under Rule 6 (3) (b) of CENVAT Credit Rule, 2001.
7. We have gone through various case laws cited by the appellants. Most of these case laws are in respect of Baggage (sic) and press mud, which are waste of agriculture inputs. In case of Rallis India Ltd. reported in - (2009-TIOL-16-HC-MUM-CX) and Sterling Gelatin reported in - (2010-TIOL-571-CESTAT-AHM), issue was relating to HCL. HCL was one of the inputs used in the manufacturing process. Waste of mother Liquor contained HCL and department demanded 8% on waste mother liquor. Facts in the present case are very different. Sugar is their final manufactured product. Brown Sugar is a residue and also sugar but not meeting the specifications of standard white sugar and requires reprocessing to convert into standard sugar. There is no dispute that inputs have been used in the manufacture of such sugar. We are therefore of the view that Brown Sugar is a residue of a manufactured product and cannot be considered as waste like Bagasse or Mother Liquor. Classification of the product would not alter the position about the applicability of Rule 6(3)(b) of CENVAT Credit Rules, 2001."
In fine, the appeal was dismissed.
(See 2013-TIOL-1620-CESTAT-MUM)
