TaxTMI 
TaxTMI 
2014 (11) TMI 919
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....in the form of Rectified Spirit, Extra Neutral Alcohol and denatured ethanol etc, in the distillery plant. All are situated within the same premises. The appellants are procuring sugarcane and after various process namely, milling, juicing, evaporation, crystallization etc., sugar is manufactured. The appellant availed CENVAT credit on inputs, capital goods etc. During the process of manufacture of sugar, molasses emerges as a by-product. Sugar and Molasses are classifiable under sub-heading No. 1701 11 90 and 1703 1000 of CETA attracting central excise duty. Some of the appellants are also procuring Molasses from other sugar mill, on payment of central excise duty and availed CENVAT credit. The molasses is processed in the distillery plant. After fermentation, etc. various products are generated, which are dutiable and exempted final products. The dutiable goods are Carbon-di-oxide, Denatured spirit, Denatured Impure Spirit and Denatured Ethanol. They are also clearing exempted final products, namely - Rectified Spirit and Extra Neutral Alcohol (ENA). All these final products are arising out of processing of molasses. The appellants claimed the benefit of exemption Notification No....
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....on of the Bench to the Legislative changes of Chapter 22 of the CETA, 1985 from time to time. He submits that the Rectified Spirit and ENA were classified under sub-heading 2204 90, prior to 1.3.2005, NIL duty. There is no dispute that Molasses were used in the manufacture of Rectified Spirit amongst others. The other products were cleared on payment of duty. After re-structuring of Tariff with effect from 1.3.2005, Rectified Spirit, Extra Neutral Alcohol etc. were cleared without payment of duty, as exempted by Notification No.3/2005-CE dated 24.2.2005 and Notification No.12/2012 dated 17.3.2012. 6.1 They have paid amount 5% / 6% / 8%, of the value of exempted goods during the period in dispute, as per Rule 6 of the CENVAT Credit Rules in respect of clearance of Rectified spirit and Extra Neutral Alcohol. Clause (vi) of the proviso to Notification No.67/95-CE (supra), provides that nothing contained in the Notification shall apply to the duty paid inputs used in relation to manufacture of dutiable and exempted goods where the manufacturer discharged the obligation prescribed under Rule 6 of CENVAT Credit Rules, 2004. 6.2 The adjudicating authority denied the benefit of Notificat....
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....T credit. 7. On the other hand, the learned Authorized Representative for the Revenue reiterates the findings of the authorities below. He drew the attention of the Bench to Heading 2207 2000 after restructuring of the Tariff. It is submitted that Rectified spirit and ENA do not find mention anywhere in the Tariff description. 7.1 Rectified spirit and ENA, prior to restructuring of the Tariff on 28.2.2005, were attracting nil rate of duty under sub-heading 2204 90 of the CETA. But, after restructuring, these items are not mentioned in the CETA and therefore it will be treated as non-excisable. After restructuring of the Tariff in line with the Customs Tariff Act, denatured ethyl alcohol is classified under 2207 2000 of CETA and heading 2207 10 has been left blank. 7.2 Sub-heading 2207 2000 covers all spirits which are Denatured and undenatured spirits are not covered under the said Heading. 7.3 Rectified spirit is fit for human consumption as per Rule 48 of the Tamil Nadu Distillery Rules, 1981. He also relied on certain extracts of Wikipedia in his compilation to substantiate his point that Rectified spirit is fit for human consumption. 7.4 Regarding the claim of the appellan....
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....1995 as amended from time to time. 8.1 For the proper appreciation of the case, we take up the facts from Appeal No. E/41188/2014 in the case of M/s. Rajshree Sugars and Chemicals Ltd. Vs. CCE, Puducherry. The adjudicating authority observed that Denatured Ethyl Alcohol were dutiable and removed from the factory on payment of appropriate excise duty and the non-excisable goods i.e. varieties of Denatured Ethyl Alcohol including Rectified spirit were removed on payment of an amount equivalent to 6%, on the invoice value in terms of Rule 6 of the CENVAT Credit Rules, 2004. Ethyl Alcohol mainly has an intoxicating agent in alcohol-based liquor for human consumption. Prior to 1.3.2005 of Tariff restructuring from 6 digit to 8 digit Heading No. 2204.90 of the CETA covers Rectified Spirit and ENA, NIL rate of duty. The appellants were eligible to avail the CENVAT credit on the molasses captively used in the manufacture of dutiable and exempted products. The appellants reversed the amount under Rule 6 of the CENVAT Credit Rules, 2004 at the time of clearance of the exempted Denatured Ethyl Alcohol including Rectified spirit. According to Revenue, after restructuring of the Tariff from 6 ....
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....ohol and other spirits, denatured, of any strength 12% (IV) Notification No. 3/2005-CE dated 24.2.2005 (Serial No. 14 of the Table) 'all spirits (other than denatured ethyl alcohol of any strength)' under sub-heading No. 2207 20 00 extended nil rate of duty. (V) Notification No. 3/2005-CE dated 24.2.2005 was superseded by Notification No. 12/2012-CE dated 17.3.2012. Sl. No. 40 of the Table appended to Notification No. 12/2012 'all spirits (other than denatured ethyl alcohol of any strength)' under sub-heading 2207 20 00, extended nil rate of duty. (VI) In the present case, the issue involved is eligibility of Notification No. 67/95-CE (supra), which is as under:- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1994) read with sub-section (3) of section3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), (hereinafter referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts - (i) capital goods as....
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....rdingly, all the field officers must ensure implementation of the amended Tariff Act (including 8-digit classification code in it's new 1st & 2nd Schedules) from 28.02.2005. Trade should also be suitably informed immediately and guided in the matter so that the transition from 6-digit to 8-digit classification code is smooth without any difficulty to the trade in day-to-day clearances. 3. Notification No. 3/2005-CE dated 24th February 2005 has been issued to preserve the existing duty rates on specified commodities where effective rates were built into the six-digit tariff, but are now subject to different tariff rates in the 8-digit code. This is subject to any subsequent changes. 8.4 In the present case, there is no dispute that prior to 28.2.2005, Rectified Spirit and ENA manufactured by the appellant were covered under sub-heading No. 2204.90, NIL rate of duty. After amendment of Tariff (8 Digit Classification Code), Heading 22.04 would correspond to Heading No. 22.07. In the above Board Circular, it has been clarified that Notification No. 3/2005-CE dated 24.2.2005 was issued to preserve the existing duty rate. So, it is clearly evident that the Rectified Spirit existi....
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....eemed to have been substituted. No. 4/3/2002-CX.I (Pt.II) Abhay Kumar Srivastav Deputy Secretary to the Government of India Note : This notification intends to take care of the technical changes adopted in the numbering scheme for Central Excise classification through the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005). These amendments do not involve any substantive changes in the existing rules, so the particulars of each rule have not been indicated. Furthermore, during debate in Lok Sabha on the said Central Excise Tariff (Amendment) Bill, 2004, the then Hon'ble Minister of Finance in regard to the purpose of introduction of eight digit classification has stated that 'the purpose of the Bill is very limited. On the custom side, we already have an eight-digit classification. It is, therefore, necessary that on the Excise side also we have the same eight digit classification. What we have found is that eight digit classification helps both trade and revenue department to identify a particular product and heading under which it falls. Immediately, the number of disputes comes down very sharply....'. 31. A perusal of the 'Note' appended below the Notification dated 24....
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....umption. Both Rectified Spirit and Denatured Ethyl Alcohol are only varieties of Ethyl Alcohol and liquor for human consumption. As per Dictionary meaning, Rectified Spirit is distilled Ethanol with only 4.43% water and it is nothing but Ethyl Alcohol with highly concentrate Ethanol and cannot be fit for human consumption. Normally, Ethyl Alcohol are ranging from 10% to 40% in liquor. In any event, Rectified Spirit (95) is more akin to denatured Ethyl Alcohol and both are industrial alcohol falling under Heading No. 2207 of HSN. In this perspective, if we look into Notification No. 3/2005-CE (supra), as claimed by the appellants, the words 'all spirits' in Serial No. 14 of the Table of the said Notification have wide amplitude and it includes irrespective of 'whether denatured or not'. So, we are of the view that Rectified Spirit and ENA are covered by exemption Notification. 8.6 The Tribunal in the case of Ugar Sugar Works Vs. CCE 2007 (214) ELT 33 held that with effect from 1.3.2005, Rectified spirit along with denatured spirit would cover under sub-heading No. 2207 2000 and it cannot be said that with effect from 1.3.2005, it became non-excisable. The relevant portion of ....
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....tributable to the molasses used in or in relation to the manufacture of 3073155 ltrs. of Rectified Spirit cleared without payment of duty. 8.7 In the case of CCE Vs. M/s Bazpur Cooperative Sugar Factory Ltd. - 2014-TIOL-1733-HC-UKHAD, the Hon'ble Uttarkhad High Court held that Rectified spirit attracting nil rate of duty and waste/storage loss of Rectified Spirit, credit availed on duty paid on molasses is required to be reversed under Rule 6(1) of the CENVAT Credit Rules, 2004. In that case, while scrutinizing the return of the assessee for the month from July 2005 to March 2006, it was observed that the stock was short by 33172.80 bulk litres. It was shown as wastage. The Hon'ble High Court in favour of the Revenue held that CENVAT credit attributable to the quantity of inputs (molasses) used in or in relation to the manufacture of the exempted final products (Rectified spirit), attracting nil rate of duty and which was reported as wastage/storage loss should be reversed as per provisions of Rule 6(3) of the CENVAT Credit Rules, 2004. In the case of Godavari Sugar Mills Ltd. Vs. CCE 2007 (212) ELT 234 it was held that molasses used for manufacture of Rectified spirit and d....
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....of the Hon'ble Bombay High Court in the case of Niphad Sakhar Karkhana Ltd. Vs. CCE - 2014 (300) ELT 66 (Bom.). In that case, the assessee filed appeal along with stay application before the Tribunal. By stay order, the Tribunal directed the assessee to predeposit a sum of Rs. One crore out of Rs. 1.14 crores in accordance with the provisions of Section 35F of the Central Excise Act, 1944. The Honble High Court directed the Tribunal to decide the stay application afresh considering the decisions to take prima facie view whether they are applicable to the facts of the impugned case before directing predeposit. The learned AR also relied upon the decision of the Tribunal in the Ugar Sugar Works Ltd. (supra), which we have already discussed above. In the case of Kothari Sugars & Chemicals Ltd. Vs. CCE - 2010 (262) ELT 545, the Tribunal remanded the matter. In the case of Venkateshwara Winery & Distillery Ltd. Vs. CCE - 2013 (295) ELT 306, the Tribunal granted stay. In our considered view, none of the case laws relied upon by the learned AR are applicable in the facts and law of the case. 8.10 The learned AR referred Rule 48 of Tamilnadu Distillery Rules, 1985, Govt. of Tamilnadu, to....