Excisability of waste/ residue arising during the process of manufacture – Withdrawl of Circular

CBIC published a Circular No. 1084/05/2022-CX dated 07.07.2022 to withdraw the earlier circular no. 127/15/2016-CX dated 25.04.2016 which pertains to the excisability of bagasse and similar other by-product or waste arising due to the course of manufacture of an excisable product.

Circular No. 1084/05/2022-CX dated 07.07.2022

Circular No. 1084/05/2022-CX

CBIC-110267/33/2022-CX-VIII SECTON-SEC

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Tax & Customs

(CX & ST Wing)

To,

1. The Principal Chief Commissioner/ Chief Commissioner, CGST & CX(all)
2. The Principal Director General / Director General (All)
3. The Principal Commissioner/ Commissioner, CST &CX (All)
4. Webmaster.cbic@icegate.gov.in for uploading the instructions on CBIC’s website.

Sir/Madam,

Subject: Excisability of waste/ residue arising during the process of manufacture – Withdrawl of Circular No. 127/15/2016-CX dated 25.04.2016- Reg.

Excisability of bagasse and similar other by-products or waster during the course of manufacture of an excisable product has been brought to the attention of the Board.

2. It may be recalled that rule 6 of the CEVAT Credit Rules, 2004 was amended with effect from 01.03.2015 by inserting Explanation 1 and 2 in sun-rule (1) of rule 6, which provides that exempted goods or final product shall include non-excisable goods/ dealers cleared for consideration from the factory.

3. Accordingly, Circular No. 2017/15/dated 25.04.2022 was issued highlighting that Bagasse, Dross and Skimmings on non-ferrous metalas or any such by-product or waste, which are non-excisable goods and are cleared for a home consumption from the factory need to be treated like exempted goods for the purpose of reversal of credit of input and input services, in terms of rule 6 of the CENVAT Credit Rules, 2004. This circular was issued in the background of judgement of the Hon’ble Supreme Court in the case of Union of India vs. M/s. DSCL Sugar Ltd(2015(322) E.L.LT 679(S.C.) holding that Bagasse is only an agricultural waste and reside and it is not a result of any process which can be termed as ‘manufacture . Similar conclusion was also drawn by the Honb’le High Court of Bombay in the case of M/s. Hindalco Industries Ltds. v.s Union of India (2015)(315)ELT.10(Bom)). In related to drows and skilling of aluminous, zinc or other non-ferrous metails.

4. The issue again come before the Hon’ble Supreme court in the case of Union of India vs M/s. Indian Sucrose Limited (SLP(C) No. 1700/2021, wherein the Hon’ble Supreme Court vides its judgment dated 04.3.022, referred to its observation in the Union of India vs. M/s. DSCL Sugar Ltd & Ors. (Supra) holding that Bagasse is non-excisable to which the CENVAT Credit Rules has no application, and held the Circular dated 25.04.2016 is unsustainable in law.

5. In light of above judgment, Circular No. 1027/15/2016-CX dated 25.04.2016 has become non-est and is hereby rescinded. Cases kept in Call Book on the above issue, if any, may be taken out and adjudicated in light of the law decided by the Apex Court.

6. Difficulty experienced if any in implementing the circular should be brought to the notice of the Board.

7. Hindi version will follow.

Yours Faithfully,

Rubal Saroha

Under Secretary to the Government. Under secretary to the Government of India.