Exemption for molasses inputs turns on whether the final product is excisable and liquor for home consumption.

Molasses used to manufacture undenatured ethyl alcohol was considered within the main cover of Notification No. 67/95-C.E., but the proviso denying exemption for exempted or nil-rated final products could apply only if the final product was itself excisable. Because undenatured ethyl alcohol was treated as outside the central excise levy, it could not be treated as an exempted or nil-rated good. The Tribunal also noted that only alcoholic liquor for home consumption falls outside the Union List, so it was necessary to verify whether the duty-free cleared rectified spirit was in fact alcoholic liquor for home consumption. The matter was remanded for limited factual verification, leaving the exemption claim open.

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Issues: Whether molasses used in the manufacture of undenatured ethyl alcohol was entitled to exemption under Notification No. 67/95-C.E. dated 16-3-95, and whether the proviso denying exemption for exempted or nil-rated final products could be invoked without a finding that the final product was excisable and cleared as alcoholic liquor for home consumption.

Analysis: The Tribunal applied its earlier decision in the assessee's own case and held that the main notification covered molasses as input and undenatured ethyl alcohol as a final product, but the proviso could apply only if the final product was an excisable good. Since undenatured ethyl alcohol was treated as outside the central excise levy, it could not be regarded as exempted goods or goods chargeable at nil rate. At the same time, the Tribunal noted that only alcoholic liquor for home consumption is excluded from the Union List, so it was necessary to verify whether the rectified spirit cleared without duty was in fact alcoholic liquor for home consumption.

Conclusion: The matter was remanded to the original authority for limited verification, and the assessee's entitlement to the notification benefit was kept open subject to that verification.

Final Conclusion: The impugned order was set aside and the matter sent back for verification on the limited factual issue, leaving the exemption claim to be decided accordingly.

Ratio Decidendi: A proviso denying exemption for exempted or nil-rated final products cannot be invoked unless the final product is itself excisable, and entitlement under the notification must be examined in light of whether the goods fall within the central excise levy.

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