cenvat credit

[Guest]

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?

[DR.MARIAPPAN GOVINDARAJAN]

Dear Sir,

You havementioned that dutiable and non dutiable ethyl alcohol are produced.  You have also paid 5% of tax on non dutiable product by giving option to pay service tax @ 5% since you have not maintained separate records for the non dutiable goods.  You can avail CENVAT credit against the duty payable on dutiable goods.  CENVAT credit can be availed only if there is a nexus between input and the manufacturing of final products.   If it could be proved then you  can utilise the credit for the payment of duty on sugar; otherwise not.

 

Regards,

 

M. GOVINDARAJAN

09486103193

 

[Snehal Kulkarni]

Though the molasses is by product to the Sugar Industry, it is cleared on Payment of Duty. and For Distillary unit, it is a Input.

You can avail the Cenvat Credit on such duty paid goods.

 

 

AI Summary

Cenvat credit usable for duty on other final products if nexus between input and product is established. Cenvat credit on duty paid molasses, a by product of sugar, may be utilised for duty on sugar only if a demonstrable nexus exists between the molasses (input) and the manufacture of sugar; where nexus and proper account maintenance are lacking, utilisation is not permissible.