Electricity generated from bagasse and sold externally does not attract Rule 6(3)’s six-percent payment.

The respondent, a sugar manufacturer, generated electricity by burning bagasse, a by-product of sugarcane crushing. It used some electricity captively and sold surplus electricity to the Maharashtra State Electricity Distribution Company Ltd.

The Department treated the electricity sold as exempted and demanded an amount equal to 6% of its value under Rule 6(3) of the CENVAT Credit Rules, 2004, along with interest and penalties. The adjudicating authority confirmed the demand; the Commissioner (Appeals) set it aside, relying on *Jawahar SSK Ltd.* The Revenue appealed to the Tribunal

Whether the respondent was required to pay an amount under Rule 6(3) of the CENVAT Credit Rules, 2004, on electricity generated from bagasse and sold outside the factory

Whether the Commissioner (Appeals) was justified in setting aside the demand confirmed by the adjudicating authority

Rule 6(3) of the CENVAT Credit Rules, 2004 concerns an amount payable in respect of exempted goods or services where common inputs or input services are used.

In *Union of India v. DSCL Sugar Ltd.*, the Supreme Court held that bagasse, as agricultural waste and residue not resulting from a manufacturing process, is not excisable; consequently, Rule 6 of the CENVAT Credit Rules does not apply on that basis.

The Tribunal also relied on its consistent decisions that electricity generated from bagasse and sold to a State electricity authority is not subject to the 6% amount under Rule 6(3).

The Tribunal found that the dispute was covered by a consistent line of Tribunal decisions concerning electricity generated from bagasse and sold to electricity authorities.

It relied on *DSCL Sugar Ltd.* for the principle that bagasse is waste and is not the result of manufacture, and on decisions involving the respondent and other sugar manufacturers applying that principle to Rule 6(3).

As the issue had been resolved in favour of sugar manufacturers and the Revenue showed no basis for a different outcome, the Tribunal held that the Commissioner (Appeals)’ order required no interference.

It sustained the Commissioner (Appeals)’ order and dismissed the Revenue’s appeal.