Tribunal rules in favor of distillery manufacturer on molasses credit reversal issue

The Tribunal held in favor of the Appellant, a distillery manufacturer, in a case concerning the reversal of credit on molasses used for manufacturing ethyl alcohol. The Tribunal determined that the Appellant's treatment of ethyl alcohol as an intermediate product was not necessary for determining duty liability, as the final products were alcohol fit for human consumption and Denatured Ethyl Alcohol. Therefore, the Appellant was allowed to waive the pre-deposit requirement and stay petition during the appeal process.

---

---

Issues:
1. Reversal of credit on molasses used for manufacturing ethyl alcohol.
2. Admissibility of duty credit on molasses for manufacturing Denatured Ethyl Alcohol.
3. Treatment of ethyl alcohol as an intermediate product.
4. Determination of final products for duty liability.

Analysis:
1. The Appellant, a distillery manufacturer, utilized ethyl alcohol for preparing alcohol fit for human consumption and Denatured Ethyl Alcohol, an excisable product. The Appellant had been reversing the credit taken on molasses at the time of consumption for preparing alcohol for human use. The Tribunal previously held that if ethyl alcohol is non excisable, the Appellant must reverse the credit on molasses. The matter was remanded for quantifying the Cenvat credit.

2. In the impugned order, the ld. Commissioner directed the reversal of the entire credit amount on molasses as ethyl alcohol, a non excisable product, is manufactured first, and only Denatured Ethyl Alcohol is excisable. The Commissioner argued that since ethyl alcohol is used first and then for different purposes, the credit of duty paid on molasses is not admissible.

3. The Tribunal found that the Appellant clears alcohol for human consumption and Denatured Ethyl Alcohol, treating them as final products, not the ethyl alcohol that emerges in between. The duty liability of the intermediate product arises only when the finished goods are exempted. As the Appellant manufactures both dutiable and non excisable goods, examining the intermediate product is unnecessary for determining the final product. Consequently, the Tribunal held that the Appellant established a prima facie case in their favor, waiving the pre-deposit requirement and allowing the stay petition during the appeal's pendency.

---