By TIOL News Service

MUMBAI, FEB 16, 2014: 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 was cleared 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.

Before the CESTAT the appellant submitted that ‘Brown Sugar' is a waste just like Bagasse and Press Mud which too are classifiable under heading 23.01; 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.

The Bench while upholding the order passed by the lower authorities & dismissing the appeal 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."

We reported this as 2013-TIOL-1620-CESTAT-MUM.

Against this order, the appellant is before the CESTAT with a ROM application and submits that the 'case laws relied by the Counsel for the appellant were not considered by the Tribunal while passing the order '.

The CESTAT drew the attention of the appellant to the opening line of the paragraph 7 of the order (supra) and dismissed the application for Rectification of Mistake as being without any merits.

In passing : Blind zeal can only do harm – Magnus Gottfried Lichtwer

(See 2014-TIOL-236-CESTAT-MUM)