2014 (10) TMI 718 - AT - Central Excise

Tribunal rules in favor of appellant, overturns duty and penalties, rejects extended demand period.

M/s NIPHAD SSK LTD Versus CCE, NASIK

The Tribunal ruled in favor of the appellant, setting aside the Commissioner's order confirming Excise duty and penalties. It found that the duty on ... CENVAT Credit - Debit notes - Credit on ethyl alcohol - Captive consumption - Held that:- Debit notes raised every month by the appellant to the Superintendent of Division III of Nasik that the molasses used in manufacture of ethyl alcohol was systematically reversed every month either from RG-23 account or from PLA account and intimated to the department. We have seen the copies of the debit notes. One debit note No. 90/03-04 dated 07.06.2003 bears the stamp of Inspector of the Range. In any case the authenticity of the debit notes has not contested by the Revenue. It is seen from the documents submitted in the appeal that Superintendent Range I had directed the appellant to reverse proportionate credit as per the provisions of then Rule 57CC of the Central Excise Rules which provided for the procedure of payment of duty on inputs used in the manufacture of exempted as well as dutiable final products. On this basis, the appellant was reversing the credit on molasses every month and intimating the department by means of the debit notes. The total amount of duty of ₹ 83,95,165/- on quantity of 16790.330 MT's of molasses has admittedly been paid. Therefore, the demand of duty on molasses used in the manufacture of exempted ethyl alcohol is not sustainable - Decided in favour of assessee. Issues:Recovery of duty on molasses used in manufacturing exempted ethyl alcohol, CENVAT Credit reversal, Applicability of Notifications, Invocation of extended period for demand.Analysis:The appellant was aggrieved by the order-in-original of the Commissioner Nasik confirming Excise duty and penalties on the manufacture of sugar, molasses, ethyl alcohol, and denatured ethyl alcohol. The case involved the demand for duty on molasses produced in the factory and used for manufacturing exempted ethyl alcohol, along with CENVAT Credit attributable to molasses used in the production of non-excisable ethyl alcohol. The appellant contended that they availed CENVAT Credit on molasses purchased from outside and reversed the credit on the entire quantity of molasses used in ethyl alcohol production. They claimed eligibility for exemption under Notification 67/95-C.E as amended by Notification 31/2001-CE and Notification 5/2002 Central Excise Rules, 2002. The appellant argued that they had been intimating the credit reversal on a monthly basis through debit notes.The Revenue defended the Commissioner's findings, leading to a detailed consideration by the Tribunal. The first issue revolved around the recovery of duty on molasses used in manufacturing non-dutiable ethyl alcohol. The Tribunal observed that the appellant consistently reversed the credit on molasses every month and informed the department through debit notes. The authenticity of the debit notes was not contested by the Revenue. The Tribunal found that the duty on molasses used in manufacturing exempted ethyl alcohol was not sustainable as the total duty had already been paid. Regarding the demand for credit attributable to a specific quantity of molasses, the Tribunal noted that the Commissioner's decision was flawed as the credit on the molasses had already been reversed and paid, rendering the additional demand unjustified.The Tribunal further addressed the issue of the extended period invoked by the Commissioner. While disagreeing with the Commissioner's findings on merit, the Tribunal held that the extended time period could not be invoked because the appellant had been regularly submitting monthly details through debit notes, showing the credit reversals. Consequently, the Tribunal set aside the order-in-original and allowed the appeal in favor of the appellant.