Double recovery and extended limitation barred where duty on captively used molasses was already reversed and disclosed

Monthly debit notes showing reversal or payment of duty on molasses used to manufacture exempt ethyl alcohol were treated as sufficient disclosure, so a fresh demand on the same quantity of input was unsustainable. The further CENVAT credit demand based on that identical molasses was also rejected because it duplicated the earlier recovery and amounted to double recovery. Since the reversals were periodically intimated to the department, the extended period of limitation was not invocable. The order confirming duty, interest, and penalties was set aside.

---

---

Issues: (i) Whether duty could be demanded again on molasses captively consumed for manufacture of exempt ethyl alcohol when the appellant had already reversed or paid the amount through monthly debit notes; (ii) Whether the demand of CENVAT credit attributable to the same molasses resulted in impermissible double recovery; (iii) Whether the extended period of limitation was invocable despite monthly disclosure of the reversals.

Issue (i): Whether duty could be demanded again on molasses captively consumed for manufacture of exempt ethyl alcohol when the appellant had already reversed or paid the amount through monthly debit notes.

Analysis: The monthly debit notes showed systematic reversal of the credit or duty linked to the molasses used in the manufacture of ethyl alcohol, and the departmental record bore acknowledgment of such intimation. The appellant had also acted in the background of the procedure then applicable to inputs used in the manufacture of exempted and dutiable final products. Since the amount had already been reversed or paid, a fresh demand on the same quantity of molasses was unwarranted.

Conclusion: The demand of duty on the captively consumed molasses was not sustainable.

Issue (ii): Whether the demand of CENVAT credit attributable to the same molasses resulted in impermissible double recovery.

Analysis: The entire credit on the molasses had already been shown as reversed or paid. The further demand proceeded on the same input quantity and therefore duplicated the earlier recovery, which was not legally justified.

Conclusion: The additional demand of CENVAT credit was not sustainable as it amounted to double recovery.

Issue (iii): Whether the extended period of limitation was invocable despite monthly disclosure of the reversals.

Analysis: The appellant had been filing monthly debit notes and showing the reversals to the department. In such circumstances, there was no basis to invoke the extended limitation period.

Conclusion: The extended period of limitation was not invocable.

Final Conclusion: The order confirming duty, interest, and penalties was set aside, and the appeal succeeded in full.

Ratio Decidendi: Where the assessee has already reversed or paid the amount on inputs used in exempted goods and has disclosed the same periodically to the department, a second demand on the same transaction is unsustainable and the extended period of limitation cannot be invoked.

---