CESTAT Chennai allows exemption under Notification 67/95 for rectified spirit from captive molasses consumption

CESTAT Chennai held that denial of exemption under Notification 67/95 dated 16.3.1995 for rectified spirit manufactured from captively consumed molasses was incorrect. The tribunal relied on precedent from Sri Ambika Sugars Ltd. and Rajshree Sugars case, determining that rectified spirit qualifies as excisable goods covered under the exemption notification for captive consumption. The impugned order was set aside and appeal was allowed, granting the benefit of exemption to the appellant.

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Issues Involved:
1. Whether the Revenue is justified in denying the benefit of exemption Notification No. 67/95 dated 16.03.1995Rs.

Summary:

Issue 1: Denial of Exemption Notification No. 67/95

The appellant, a manufacturer of ethyl alcohol, Rectified Spirit (RS), Ethanol, and Extra Neutral Alcohol (ENA), claimed exemption u/s Notification No. 67/95-CE dated 16.03.1995 for molasses used in the production of RS and ENA. The Revenue contended that post 01.03.2005, RS was omitted from Heading 2207 of the Central Excise Tariff Act, 1985, thus not qualifying as a 'final product' for exemption purposes. A Show Cause Notice dated 21.10.2013 was issued, leading to the confirmation of duty demand by the original authority.

The appellant argued that the issue had been settled in their favor in previous cases, including their own case for a different period by the Chennai Bench of CESTAT. The Tribunal referenced the case of Sri Ambika Sugars Ltd., which held that denial of exemption on molasses captively consumed to manufacture RS and ENA was incorrect. The Tribunal noted that the restructuring of the Tariff from 6-digit to 8-digit did not alter the exemption status of RS and ENA, supported by CBEC Circular No. 808/5/2005-CX dated 25.02.2005.

The Tribunal found that prior to 28.02.2005, RS and ENA were covered under sub-heading No. 2204.90 with NIL duty rate, which post-amendment corresponded to Heading No. 22.07. The Board Circular clarified that the existing duty rates were preserved, and RS and ENA remained exempted goods under Notification No. 3/2005-CE. The Tribunal also referenced the Hon'ble Allahabad High Court's decision in Gularia Chini Mills, which supported the classification and exemption of goods post-restructuring.

The Tribunal concluded that the denial of exemption Notification No. 67/95 on molasses used in the manufacture of RS and ENA was unsustainable. The appeal was allowed, and the impugned order was set aside with consequential benefits as per law.

(Order pronounced in open court on 25.04.2024)

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