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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether rectified spirit and ethyl alcohol are different commodities for the purpose of tariff classification and, if not, whether Cenvat credit was inadmissible on the ground that rectified spirit emerged as an intermediate product in the manufacture of denatured spirit.
Analysis: The unit manufactured sugar and molasses, and molasses was fermented to obtain ethyl alcohol, which was then denatured. The dispute turned on whether rectified spirit coming into existence before denaturing was a separate non-excisable product or was merely ethyl alcohol. The earlier tariff entries and the later tariff item were read in the light of the Supreme Court's observation that rectified spirit for industrial process is purified ethyl alcohol. On that basis, rectified spirit and ethyl alcohol were treated as one and the same commodity. Since rectified spirit was held to fall within Tariff Item No. 2207 20 00, the foundation of the demand that Cenvat credit stood snapped on emergence of a non-tariff product failed.
Conclusion: Rectified spirit is ethyl alcohol and falls within Tariff Item No. 2207 20 00. The show cause notice and the demand based on denial of Cenvat credit were unsustainable.
Ratio Decidendi: Where the intermediate product is only rectified spirit, being ethyl alcohol itself, its emergence does not create a separate non-excisable commodity so as to deny Cenvat credit on the ground that manufacture passed through a product outside the tariff.
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