2026-VIL-1800-CESTAT-HYD-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 to electricity generated from bagasse and to press-mud emerging as by-products in the manufacture of sugar and molasses – Appellant, a manufacturer of sugar and molasses on which duty was paid, used bagasse to produce electricity, part of which was used within the factory and part sold to the State power distribution company, and distributed press-mud free of cost to cane growers as manure, without maintaining separate accounts of inputs and input services used for dutiable and non-dutiable goods – SCN proposed recovery under Rule 6(3) on the value of electricity sold and on press-mud, which was confirmed by the Commissioner with interest and penalty – Appellant contended that Revenue cannot choose one of the options under Rule 6 and demand recovery under it, that bagasse is agricultural waste not resulting from manufacture so that Rule 6 does not apply, and that proportionate Cenvat credit had anyway been reversed – Whether demand under Rule 6(3) is sustainable in respect of electricity generated from bagasse and press-mud – HELD – The facts are identical to those decided by the Hon'ble Supreme Court, which held that bagasse is only agricultural waste or residue not resulting from any process of manufacture, that it does not fall within the definition of manufacture under Section 2(f) even after the 2008 amendments as no process in respect of it is specified in the Section or Chapter Notes, and that Rule 6 consequently has no application, the denial of credit on electricity having been based only on the erroneous premise that bagasse attracts duty. On this ground alone the impugned order deserves to be set aside. The contention that Revenue cannot raise a demand under Rule 6(3) of its own choice among the options available to the assessee also has force in view of the decision of the jurisdictional High Court, and reversal of proportionate Cenvat credit is as good as not availing the credit at all, as held by the Hon'ble Supreme Court – The demand, interest and penalty are not sustainable, the impugned order is set aside and the appeal is allowed
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