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Issues: Whether Cenvat credit on molasses, inputs, capital goods and input services used in the distillery for manufacture of rectified spirit was admissible when rectified spirit was treated as non-excisable.
Analysis: The Tribunal followed its earlier decision in the appellant's own case. It noted that the manufacturing chain involved molasses leading to rectified spirit and thereafter to denatured spirit, and examined whether rectified spirit and ethyl alcohol were distinct commodities. Relying on the legal position that rectified spirit is ethyl alcohol purified to the requisite strength and is not a separate commodity for the purpose of the tariff, the Tribunal held that rectified spirit falls within tariff item 22072000. Since the foundation of the demand was that rectified spirit did not find place in the tariff after 01.03.2005, that premise was rejected. The Tribunal also held that the credit chain was not broken merely because rectified spirit emerged in the process, and the denial of credit could not be sustained on the facts.
Conclusion: The credit denial was unsustainable and the issue was decided in favour of the assessee.
Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential benefits in accordance with law.
Ratio Decidendi: Rectified spirit is to be treated as ethyl alcohol for tariff purposes, and Cenvat credit cannot be denied on inputs, capital goods and input services used in its manufacture merely because it is said to be non-excisable.
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