2026-VIL-1691-CESTAT-MUM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Applicability of Rule 6(3) of CENVAT Credit Rules, 2004 to electricity generated from bagasse and sold to the State electricity distribution company – Appellant, engaged in the manufacture of sugar, molasses and denatured ethyl alcohol, burnt bagasse generated as waste in its boiler to produce steam for generating electricity, which was captively consumed and the surplus sold to the State electricity distribution company - Department contended that the sale of electricity is a clearance of exempted goods, that the Appellant was required to follow the procedure under Rule 6(3), and that an amount equal to 6% of the value of electricity sold was payable - Show cause notice demanded the amount under Rule 14 of the CENVAT Credit Rules read with Section 11A(1) of the Central Excise Act, 1944 with interest, and the Commissioner confirmed the demand and imposed penalty under Section 11AC and Rule 27 - Whether the Appellant is required to pay an amount equal to 6% of the value of electricity cleared outside the factory under Rule 6(3) - HELD - A consistent view has been taken by the Tribunal that electricity produced from bagasse and sold to the electricity authority of the State Government cannot be subjected to payment of an amount equal to 6% of the value of electricity sold under Rule 6(3). Following Olam Agro India and Indreshwar Sugar Mills, which involved identical facts, the issue is no more open for debate. In Olam Agro India, it was noted that an identical dispute had been decided in favour of the assessees by the Commissioner of GST, Aurangabad, that the order was accepted by the Committee of Chief Commissioners and not appealed, and that the matter had therefore attained finality - The Supreme Court in DSCL Sugar held that bagasse is only an agricultural waste and residue which is not the result of any process, and that in the absence of manufacture there cannot be any excise duty. Since it is not a manufacture, Rule 6 of the CENVAT Credit Rules has no application, and credit in respect of electricity was denied only on the erroneous premise that bagasse attracts excise duty - The issue is settled by the Supreme Court and is no more res integra. The impugned order confirming the demand, interest and penalties is set aside and the appeal is allowed
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