Denatured Ethyl Alcohol Credit: denaturant cannot be separately deducted to deny the input benefit under the notification.

Denatured ethyl alcohol remained eligible for money credit under Notification No. 231/87-C.E. because denaturation only renders alcohol unfit for beverage use and does not change the character of the input for tariff purposes. The denaturant added to produce denatured ethyl alcohol formed part of the eligible input and could not be separately excluded to deny credit. On that basis, the demand was held unsustainable on merits, and the limitation issue was left unexamined.

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Issues: Whether the denaturant contained in denatured ethyl alcohol could be excluded while extending the benefit of the money credit scheme under Notification No. 231/87-C.E. issued under Rule 57K of the Central Excise Rules, 1944.

Analysis: The notification granted credit on ethyl alcohol used as raw material for specified final products. Denatured ethyl alcohol remained ethyl alcohol for the purposes of the tariff heading, and denaturation was only the process of rendering alcohol unfit for beverage use. Since the finished input was denatured ethyl alcohol, the quantity of denaturant formed part of that input and could not be segregated for denying credit. The demand was therefore not sustainable on merits, and the limitation plea was not examined.

Conclusion: The exclusion of the denaturant from denatured ethyl alcohol for the purpose of denying credit was not justified, and the demand was unsustainable.

Ratio Decidendi: Where a notification grants credit on denatured ethyl alcohol as an eligible input, the denaturant added to render the alcohol unfit for beverage use cannot be separately deducted to deny the statutory benefit.

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