2025 (1) TMI 531 - AT - Central Excise

Undenatured Ethyl Alcohol refund claim dismissed as non-excisable goods cannot qualify under Rule 6(3) CENVAT Credit Rules

CESTAT Chennai dismissed the appellant's refund claim regarding Undenatured Ethyl Alcohol. The tribunal held that Undenatured Ethyl Alcohol is ... Rejection of refund claim - classification of Undenatured Ethyl Alcohol - classifiable under the heading 2204 or not - Adjudicating Authority holds that the credit taken by the Appellant in relation to the manufacture of the Undenatured Ethyl Alcohol (described by the Adjudicating Authority as being non-excisable) was without the authority of law - HELD THAT:- Respectfully following the decision of co-ordinate Bench in the Appellant’s own case [2017 (12) TMI 314 - CESTAT CHENNAI], that the Undenatured Ethyl Alcohol is not excisable. Once the goods are not excisable, they cannot be considered exempt to fall within the scope of Rule 6(3). The Commissioner (Appeals) in the impugned order was thus right in holding that the Appellant could not have claimed credit in the first place so as to reverse the same by payment, and that the reversal of such credit by payment p ut the Appellant in a position in which it was compliant with the law. Hence, the Commissioner (Appeals) was also right in holding that there was no question of granting refund as claimed. Conclusion - The goods not classified as excisable under the tariff cannot be treated as exempt and do not fall within the scope of Rule 6(3) of the CENVAT Credit Rules. The appellant's claim for a refund was not justified, as the goods in question were not excisable. There are no merit in this Appeal filed by the assessee and accordingly, the same is dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case is whether the authorities were justified in rejecting the refund claim of the appellant concerning CENVAT credit on Undenatured Ethyl Alcohol for the period between 01.03.2005 and 31.12.2005.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework revolves around the classification of Undenatured Ethyl Alcohol under the Central Excise Tariff and the application of Rule 6 of the CENVAT Credit Rules, 2004. Prior to 01.03.2005, Undenatured Ethyl Alcohol was classified under heading 2204.90, with a nil rate of duty. Post 01.03.2005, due to changes in the tariff system, it was not classified as excisable goods. Rule 6(3) of the CENVAT Credit Rules provides the conditions under which a manufacturer must pay an amount equivalent to the CENVAT credit attributable to inputs used in the manufacture of exempted goods.Court's Interpretation and ReasoningThe court interpreted that Undenatured Ethyl Alcohol was not excisable after 01.03.2005, and thus, it was not subject to the conditions of Rule 6(3) concerning exempted goods. The court relied on the decision in the appellant's previous case, which established that Undenatured Ethyl Alcohol was not excisable.Key Evidence and FindingsThe appellant continued to pay CENVAT credit amounts post 01.03.2005 under the misconception that the goods were still exempt rather than non-excisable. This payment was made despite the goods not being classified as excisable under the revised tariff.Application of Law to FactsThe court applied the legal framework to the facts by determining that the appellant's payment of CENVAT credit was based on a misunderstanding of the goods' classification. Since the goods were not excisable, the appellant's claim for a refund of the CENVAT credit was unfounded.Treatment of Competing ArgumentsThe appellant argued that the refund was justified due to the misclassification, relying on previous tribunal decisions. However, the court distinguished these cases, noting that they involved different types of alcohol or addressed different legal questions. The court emphasized the precedent set in the appellant's own previous case, which was directly relevant.ConclusionsThe court concluded that Undenatured Ethyl Alcohol was not excisable post-01.03.2005, and therefore, the appellant was not entitled to a refund of CENVAT credit. The rejection of the refund claim by the authorities was upheld.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning'Once goods are not excisable, they cannot be exempt.'Core Principles EstablishedThe judgment reinforces the principle that goods not classified as excisable under the tariff cannot be treated as exempt and do not fall within the scope of Rule 6(3) of the CENVAT Credit Rules.Final Determinations on Each IssueThe court determined that the appellant's claim for a refund was not justified, as the goods in question were not excisable. The appeal was dismissed, affirming the decisions of the lower authorities.