2017 (3) TMI 352 - AT - Central Excise

Tribunal equates Rectified Spirit to ethyl alcohol, allows Cenvat Credit. Appeal success for manufacturing process.

The Tribunal allowed the appeal, citing a previous ruling that deemed Rectified Spirit equivalent to ethyl alcohol and admissible under the Central Excise ... Cenvat Credit admissibility - rectified spirit is ethyl alcohol - classification under tariff heading 22072000 - composite unit and captive consumption - captive consumption exemption and excisabilityCenvat Credit admissibility - rectified spirit is ethyl alcohol - classification under tariff heading 22072000 - composite unit and captive consumption - Validity of demand for reversal of Cenvat Credit availed on molasses, other inputs, input services and capital goods used in the distillery for manufacture of rectified spirit during August, 2007 to July, 2012. - HELD THAT: - The Tribunal held that the question is covered by its earlier decision in the appellant's own case. That decision analysed whether rectified spirit and ethyl alcohol are distinct commodities and relied upon authoritative reasoning that rectified spirit (not intended for human consumption) is ethyl alcohol and falls within the tariff item subsequently numbered 22072000. Applying that conclusion, rectified spirit used in the distillery is an excisable intermediate (ethyl alcohol/rectified spirit) and the chain of Cenvat Credit is not snapped. Consequently, inputs (including molasses), input services and capital goods used in the manufacture of rectified spirit and the excisable denatured products are eligible for Cenvat Credit. The impugned demand based on the view that rectified spirit had ceased to be covered by the tariff and hence credit was inadmissible was held unsustainable. The Tribunal therefore set aside the Order-in-Original and allowed the appeal following the earlier ruling, with consequential relief as per law. [Paras 4, 5]Impugned order set aside; appeal allowed and Cenvat credit held admissible in accordance with the Tribunal's earlier decision, with consequential relief.Final Conclusion: The appellate order demands for reversal of Cenvat Credit on molasses, inputs, input services and capital goods used in manufacture of rectified spirit for August, 2007 to July, 2012 are set aside; appeal allowed following the Tribunal's prior finding that rectified spirit is ethyl alcohol covered by tariff heading 22072000 and Cenvat Credit is admissible, with consequential benefits as per law. Issues:1. Admissibility of Cenvat Credit on manufacturing non-excisable products using Molasses as input.2. Availing Cenvat Credit on Capital Goods, input, and input services.3. Applicability of Notification No. 67/1995-CE.4. Accumulation of Cenvat Credit beyond the point of emergence/clearance of Rectified Spirit.5. Irregular Cenvat Credit availed on Molasses, inputs, capital goods, and input services.Issue 1: The appellant, a sugar unit with a distillery, manufactured non-excisable products like Rectified Spirit (RS), Extra Neutral Alcohol (ENA), Power Alcohol, and Absolute Alcohol using Molasses as input. The Cenvat Credit chain was questioned as RS was considered non-excisable, leading to the denial of accumulated Cenvat Credit beyond the point of RS clearance.Issue 2: The appellant availed Cenvat Credit on Capital Goods, input, and input services as per Rule 3 of Cenvat Credit Rules, 2004. However, the Revenue noticed irregular Cenvat Credit availed on Molasses, inputs, capital goods, and input services, leading to a dispute regarding the admissibility of such credits.Issue 3: The appellant claimed exemption under Notification No. 67/1995-CE for Molasses either from their own sugar factory or purchased from outside, subject to excisability of the final product. The benefit of the notification could only be availed when the final product was excisable, raising questions about compliance with the notification conditions.Issue 4: The appellant accumulated Cenvat Credit on Molasses, inputs, capital goods, and input services used in the distillery division for manufacturing Rectified Spirit, which was deemed non-excisable. The admissibility of such accumulated credit beyond the RS clearance point was a key contention in the case.Issue 5: The Revenue alleged irregular Cenvat Credit availed by the appellant on Molasses, inputs, capital goods, and input services during a specific period. The dispute centered on the legitimacy of the Cenvat Credit claimed, leading to a detailed examination of the credits availed and their compliance with relevant regulations.In a detailed analysis, the Tribunal referred to a previous ruling in the appellant's case, where it was held that Rectified Spirit was equivalent to ethyl alcohol and thus admissible under the Central Excise Tariff. Following this precedent, the Tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law. The decision emphasized the equivalence of ethyl alcohol and Rectified Spirit, leading to the dismissal of the Revenue's contentions regarding the inadmissibility of Cenvat Credit on the manufacturing process involving Molasses and non-excisable products.