Molasses CENVAT credit allowed for manufacturing rectified spirit and undenatured alcohol under Section 22.07.2000

CESTAT Chennai held that CENVAT credit on molasses used for manufacturing rectified spirit and undenatured alcohol is allowable. The department denied credit claiming these products were non-excisable goods not covered under Central Excise Tariff Act, 1985. However, SC in Dharani Sugars case established that addition of "other" in Heading 22.04 via sub-heading 2204.90 from March 2005 was not substantive change. Board Circular clarified rectified spirit and extra neutral alcohol are covered under sub-heading 22.07.2000 after tariff restructuring, making them excisable goods eligible for exemption notification benefits. Appeal allowed, demand unsustainable.

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Issues Involved:

1. Disallowance of CENVAT credit on molasses used for the manufacture of rectified spirit and undenatured alcohol.
2. Eligibility for exemption under Notification No. 67/1995 on molasses manufactured and captively consumed for the manufacture of rectified spirit and undenatured alcohol.

Detailed Analysis:

1. Disallowance of CENVAT Credit on Molasses Used for Manufacture of Rectified Spirit and Undenatured Alcohol:

The core issue revolves around whether the appellant is entitled to CENVAT credit on molasses used in the manufacture of rectified spirit and undenatured alcohol, which the department contends are non-excisable goods. The appellant argued that the matter has been settled by the Supreme Court in the case of CCE Vs. Dharani Sugars & Chemicals Ltd., where it was determined that rectified spirit and undenatured alcohol are non-excisable goods. The Tribunal in the Dharani Sugars case, as well as in EID Parry India Ltd., followed this precedent and set aside the department's demand. The Tribunal reiterated that rectified spirit and undenatured alcohol, being non-excisable, do not attract duty, and thus, the credit availed on molasses used in their manufacture cannot be disallowed.

2. Eligibility for Exemption under Notification No. 67/1995:

The second issue is whether the appellant is eligible for the exemption under Notification No. 67/1995 on molasses manufactured and captively consumed for the production of rectified spirit and undenatured alcohol. The department's position was that since these finished products are non-excisable, the exemption cannot apply. However, the Tribunal, referencing the Supreme Court's decision and its own previous judgments, clarified that the restructuring of the tariff from six-digit to eight-digit did not substantively alter the classification or the excisability of these products. The Tribunal noted that the changes were technical and did not intend to withdraw existing benefits. The Tribunal found that rectified spirit and undenatured alcohol, despite being non-excisable, are covered under the exemption Notification No. 67/1995, provided the manufacturer complies with the obligations under Rule 6 of the CENVAT Credit Rules.

Judgment:

The Tribunal concluded that the disallowance of CENVAT credit and the denial of the exemption under Notification No. 67/1995 were not sustainable. The impugned orders were set aside, and the appeals were allowed with consequential relief, affirming the appellant's eligibility for both the CENVAT credit and the exemption. The Tribunal's decision was consistent with the Supreme Court's ruling and its own prior judgments, ensuring that the appellant's practices were in compliance with the established legal framework.

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