cenvat credit

[vasudevan sudharsanam]

A company has two units, sugar and distillery.  They have been clearing the molasses on payment of duty to distillery unit where denatured ethyl alcohol of dutiable and non dutiable are produced.  The assessee have been paying 5% on the assessable value of non dutiable ethyl alcohol under the provisions of Rule 6(3)(i) of Cenvat Credit Rules, 2004 as they have not been maintaining separate accounts.  The credit on molasses gets accumulated.  There is a circular by CBEC during 2002 regarding the utilisation of credit taken on molasses which restricts the credit.

Now as per Rule 3(4) of CENVAT credit Rules, 2004, the input credit taken may be utilised for payment of duty on any final product.

In this case, the molasses is a bye-product of sugar. 

The question is whether the input credit can be utilised for payment of duty on sugar

Is there any case laws?

AI Summary

Can CENVAT Credit from Molasses Be Used to Pay Duty on Sugar? Nexus Between Inputs and Products Key. A company with sugar and distillery units is questioning if CENVAT credit from molasses, a by-product of sugar, can be used to pay duty on sugar. They currently pay 5% on non-dutiable ethyl alcohol due to not maintaining separate accounts. One response suggests that CENVAT credit can be used if there is a nexus between inputs and final products, implying it could be used for sugar if proven. Another response confirms that since molasses is cleared on payment of duty, CENVAT credit can be availed for such duty-paid goods.