Appeal Allowed for Cenvat Credit on Capital Goods in Manufacturing Spirit

The Tribunal allowed the appeal in favor of the appellant, who was denied Cenvat credit on capital goods used in manufacturing fractionated pure/impure Spirit. The Tribunal ruled that if capital goods were used in producing exempted products later used in dutiable final products, credit cannot be denied. The Revenue acknowledged this principle in a separate case, leading to the Commissioner dropping the demand and setting aside the order denying credit.

---

---

Issues:
Denial of Cenvat credit on capital goods used in the manufacture of fractionated pure/impure Spirit.

Analysis:
The appellant, engaged in manufacturing fractionated pure/impure Spirit used in the production of Rectified Spirit (RS)/Extra Neutral Alcohol (ENA)/Denatured Spirit, faced proceedings for denial of Cenvat credit on capital goods. The contention was that although the machinery was used for non-duty paid goods, these products were further processed into denatured spirit, attracting duty payment. Citing a precedent involving M/s Rana Sugar Ltd., the Tribunal ruled that if capital goods were used in manufacturing exempted products later used in dutiable final products, credit cannot be denied. This principle was acknowledged by the Revenue in a separate case, leading to the Commissioner dropping the demand. Consequently, the impugned order denying credit was set aside, and the appeal was allowed in favor of the appellant.

---