2025 (3) TMI 960 - AT - Central Excise

Rectified spirit classified as ethyl alcohol under Tariff Item 2207 20 00; molasses-based captive consumption exempted under Notification 67/1995-CE

CESTAT held that the issue is no longer res integra in view of SC authority and a prior Tribunal decision in the appellant's case. Rectified spirit not ... Extension of benefit of exemption N/N. 67/1995-CE dated 16.03.1995 as amended for captive consumption of molasses used in manufacture of Ethyl Alcohol/ Rectified spirit - HELD THAT:- The issue is no longer res integra. Hon’ble Supreme Court in the matter of Dharani Sugars & Chemicals Ltd. [2022 (3) TMI 274 - SC ORDER] and Tribunal in appellant’s own case [2023 (8) TMI 1318 - CESTAT BANGALORE] has set aside the demand, holding that rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item No. 2207 20 00. Conclusion - Ethyl Alcohol and Rectified Spirit are excisable goods under Tariff Item No. 2207 20 00, and the exemption notification applies accordingly. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment is whether the benefit of exemption Notification No. 67/1995-CE dated 16.03.1995, as amended, can be extended for the captive consumption of molasses used in the manufacture of Ethyl Alcohol/Rectified Spirit. The Tribunal also examined whether the recovery of refunds granted as per previous orders should follow the procedure under Section 35E of the Central Excise Act, 1944, instead of issuing Show Cause Notices under Section 11A of the Act.ISSUE-WISE DETAILED ANALYSIS1. Exemption Notification No. 67/1995-CE and Captive Consumption of MolassesThe relevant legal framework involves the interpretation of exemption Notification No. 67/1995-CE, which provides exemptions under certain conditions for captive consumption. The Tribunal considered precedents such as the decision in M/s. Manakpur Chini Mills Ltd. and Bannari Amman Sugars Ltd., which addressed similar issues regarding duty liability on molasses used in the manufacture of alcohol.The Court's interpretation focused on whether Ethyl Alcohol and Rectified Spirit are considered as one and the same commodity under the Central Excise Tariff. The Tribunal referenced the Supreme Court's decision in the case of Dharani Sugars & Chemicals Ltd., which clarified that Ethyl Alcohol and Rectified Spirit are the same and find mention in Tariff Item No. 2207 20 00.Key evidence included previous judgments and tariff classifications. The Tribunal applied the law to the facts by determining that the show cause notices issued were unsustainable, given the established classification of Ethyl Alcohol and Rectified Spirit as excisable goods under the tariff.Competing arguments were addressed by referencing consistent judicial interpretations that supported the appellant's position. The Tribunal concluded that the exemption notification applied, and the demands based on the contrary interpretation were invalid.2. Recovery of Refunds and Procedural ComplianceThe legal framework for this issue involves Sections 11A and 35E of the Central Excise Act, 1944. The appellant argued that the proper procedure for challenging refunds was not followed, as the department should have appealed under Section 35E rather than issuing Show Cause Notices under Section 11A.The Tribunal's reasoning was supported by the Supreme Court's decision in ITC Ltd. v. Commissioner of Central Excise, which established that once a refund order is not appealed and attains finality, it cannot be reopened through a Show Cause Notice for recovery.The Tribunal found that the department's failure to appeal the refund order under Section 35E meant that the subsequent Show Cause Notices were procedurally improper. The Tribunal concluded that the recovery attempts were unsustainable in law.SIGNIFICANT HOLDINGSThe Tribunal held that the exemption under Notification No. 67/1995-CE applied to the captive consumption of molasses for the manufacture of Ethyl Alcohol/Rectified Spirit, aligning with the Supreme Court's interpretation that these are the same commodity under the Central Excise Tariff. The Tribunal stated, 'It is very clear from the observation of the Hon'ble Tribunal that ethyl alcohol and rectified spirit are one and the same.'The core principle established is that Ethyl Alcohol and Rectified Spirit are excisable goods under Tariff Item No. 2207 20 00, and the exemption notification applies accordingly. The Tribunal also affirmed that procedural compliance with Section 35E is necessary for challenging refund orders, rendering the Show Cause Notices issued for recovery invalid.Final determinations on each issue resulted in the allowance of the appellant's appeal with consequential relief and the dismissal of the department's appeal, reinforcing the established legal interpretations and procedural requirements.