Appellate Tribunal rules in favor of appellant on credit denial for ethanol procurement

The Appellate Tribunal CESTAT Hyderabad, in a case concerning denial of credit on ethanol procurement due to the supplier not being required to pay duty, ruled in favor of the appellant. The Tribunal held that credit cannot be denied to the receiver when the supplier has paid duty and issued valid invoices, even if the product is not classified as excisable goods. The impugned order demanding recovery of credit with interest and imposing a penalty was set aside, and the appeal was allowed, granting consequential reliefs if any.

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Issues:
- Denial of credit on ethanol procurement due to supplier not required to pay duty.

Analysis:
1. The main issue in this case is whether the appellant, who procured ethanol from a supplier paying excise duty, can be denied credit because the supplier is not required to pay duty on the product. The appellants, manufacturers of Bulk drugs, purchased ethanol from a supplier who had been paying excise duty on the product for years. A show cause notice alleged that the appellants irregularly availed credit on ethanol, contending that it was not classifiable under Chapter 29 of CETA and, therefore, not excisable goods. The original authority confirmed the demand for recovery of credit with interest and imposed a penalty, a decision upheld by the Commissioner (Appeals), leading to the present appeal.

2. The judgment refers to previous cases to settle the issue, citing the decisions in CCE, Hyderabad Vs Neuland Laboratories Ltd and Final Order No.22100-22102/2015 (M/s Aurobindo Pharma Ltd Vs CCE, Hyderabad). The appellant procured ethanol from the supplier by paying duty, and the use of ethanol as an input in manufacturing is undisputed. Various judgments establish that credit cannot be denied to the receiver when the supplier has paid duty and issued valid invoices. The Revenue's argument that ethyl alcohol is not excisable, and therefore credit is inadmissible, is deemed meritless. Following the precedent set in the mentioned judgments, the impugned order is found to be unsustainable.

3. The final decision of the Appellate Tribunal CESTAT Hyderabad, delivered by Ms. Sulekha Beevi, Member (Judicial), sets aside the impugned order. The appeal is allowed, granting consequential reliefs if any. The judgment affirms that when a supplier has paid duty and issued valid invoices, credit cannot be denied to the receiver, even if the product is not classified as excisable goods.

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