TaxTMI 
TaxTMI 
2024 (2) TMI 815
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....igible input services) post 1.4.2011 under Rule 14 of CCR, 2004 read with Sec 11A(10) of CEA, 1944 Rs.19,52,015/- (iii) Central Excise duty not paid on 6284 MTs molasses cleared and consumed captively by wrongly availing the exemption under Not. No. 67/95-CE dt.16.3.1995 under Sec 11A(10) of CEA, 1944 Rs.48,54,390/- (iv) Amount equal to 6% of value of the exempted goods payable in terms of Rule 6(3)(i) of the CCR, 2004 under Rule 14 of CCR, 2004 read with Sec 11A(10) of CEA, 1944 Rs.7,14,65,000/- Interest under Rule 14 of CCR, 2004 and Sec 11AA of CEA, 1944 As applicable Penalty under Rule 15 of CCR, 2004 and Sec 11AC of CEA, 1944 Rs.4,53,39,147/- E/30126/2018: Period of dispute April 2015 to December 2016 Date of Show Cause Notice 01.05.2017 Date of Order-in-Original 20.10.2017 Demand on Central Excise duty not paid on 6284 MTs molasses cleared and consumed captively by wrongly availing the exemption under Not. No. 67/95-CE dt.16.3.1995 under Sec 11A(10) of CEA, 1944 Rs.2,07,41,625/- Interest under Sec 11AA of CEA, 1944 As applicable Penalty under Sec 11AC of CEA, 1944 Rs.20,00,000/- E/30369/2023: Period of di....
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....s to be paid if it is cleared from the factory. However, the Appellant does not clear the molasses on payment of Excise duty. Instead, it set up a distillery plant (unit) within its factory and used the molasses captively in its distillery plant to produce Ethyl Alcohol. Ethyl Alcohol meant for human consumption is subject to regulation and taxation by the State Excise Authorities (being listed in the State List of the Seventh Schedule of the Constitution of India), whereas, Alcohol, which is denatured and unfit for human consumption is subject to Central Excise duty (being listed in the Union List of the Seventh Schedule to the Constitution). There is no dispute about this legal position. The Appellant used the molasses manufactured, in its distillery plant to produce Alcohol which it, either cleared on payment of State Excise duty or it cleared it after denaturing it on payment of Central Excise duty. The denatured Alcohol becomes unfit for human consumption, because of the denaturants. In the present case, the denaturant which was used was Methanol which the buyers of denatured alcohol bought on account of the appellant and carried it in the tankers to the distillery of the appe....
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....es. There is no good reason as to why the Cenvat credit on capital goods used in the distillery should be denied to the Appellant. In our considered view, neither the factor that an exempted good, viz, Ethyl Alcohol comes into existence prior to the manufacture of denatured Alcohol nor the fact that denatured Alcohol is not produced within the distillery machines, but in the tankers within the factory, should make any difference to the entitlement of Cenvat credit. Nothing in the CCR determines the eligibility of CENVAT credit based on at what stage the final goods become liable to central excise duty, and so long as the goods which are cleared from the factory are excisable goods, CENVAT credit on the capital goods cannot be denied. We, therefore, find in favour of the Assessee and against the Revenue, in so far as the issue of Cenvat credit on capital goods used in distillery is concerned. 10. Learned AR for Revenue relied on the decision of Division Bench of this Tribunal in Appeal E/50804/2019 of Rai Bahadur Narain Singh Sugar Mills Ltd vs Commissioner of Central GST, Dehradun, decided by Final Order No. 51568/2023 dt.29.11.2023 to assert that no Cenvat credit can be given o....
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....ices were removed from the 'includes part' of the defintion of 'input services' with effect from 1.4.2011, no Cenvat credit is admissible. Learned authorised representatives for Revenue laid emphasis on the 'Hayden's Mischief Rule of statutory interpretation' and asserted that since the services used in setting up and installation of plant and machinery were specifically removed from the includes part of the defintion of 'input service' the purport of the amendment is to deny the CENVAT credit on these services. Thus, the appellant cannot take CENVAT credit on these services. 13. The case of the Appellant is that it was entitled to Cenvat credit. According to the learned counsel for the appellant, the defintion of 'input service' has three parts and the 'means' part of the defintion is moderated by the 'includes' part and the 'excludes' part. The 'includes' part enlarges the 'means' part while the 'excludes' part restricts it. What is already in the 'means' part need not be again included in the 'includes' part. Once the service is covered in the 'means' part, CENVAT credit will be admissible unless it is excluded by the 'excludes' part of the definition. The services in dispute....
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....he main part of the definition which must be examined. If it is wide enough to cover the services in question, CENVAT credit will be available, otherwise it will not be available. The main part includes "services used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal." The term manufacture is not defined in the Rules. 18. The definitions as per rule 2 of CCR 2004 reads as follows: RULE 2. Definitions. - (1) In these rules, unless the context otherwise requires, (a) (b)... (l) (2) The words and expressions used in these rules and not defined but defined in the Excise Act shall have the meanings respectively assigned to them in the Excise Act. 19. Since the term 'manufacture' is not defined in the Rules, the definition under the Central Excise Act, 1944 must be considered. Section 2(f) of the Central Excise Act defines 'manufacture' as follows: 2(f) " manufacture" includes any process (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in....
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....cally excluded under the exclusion part of the definition, the appellant is entitled to CENVAT credit on the input services used. This Bench has already taken this view in Kellogs. Similar views have been taken by the other Benches in the other cases mentioned above." 15. We also find that in Kellogs India Pvt Ltd vs CCT, Tirupati [2020 (7) TMI 414 (Tri-Hyd)] also this Bench had taken the same view. In view of the above, we find that the Appellant is entitled to Cenvat credit on the inputs used in setting up the plant and machinery. Central Excise duty on molasses manufactured and captively used to manufacture ethyl alcohol some of which was cleared as such and some after denaturing 16. The third point of dispute is regarding the non-payment of Central Excise duty on molasses captively consumed by the Appellant. It is the case of the Department that the Appellant had wrongly availed the benefit of Notification No. 67/1995-CE dt.16.03.1995 on the molasses, which it had captively consumed. Learned Counsel for the Appellant submits that in the impugned Order, the Commissioner had relied on the judgment of the Hon'ble Supreme Court in the case of Commissioner vs Sakthi Sugar L....
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.... e) Further, while working out the amount to be reversed on inputs used exclusively in Co-Gen Plant, M/s NSL have apportioned the credit among three plants, viz., Sugar plant, Ethanol plant and Co-gen plant, basing on the steam usage by the respective plants and reversed the amount attributable to Co-gen plant only. However, in the other two plants viz., Sugar plant and Ethanol plant, the assessee are manufacturing both dutiable and exempted goods and hence they are not entitled to avail total input credit attributable to steam usage in the respective units. 17. In view of the above discrepancies reported by the Range Superintendent, the Commissioner held that the Appellant had not discharged its obligatoins under Rule 6(3A) of CCR and held that the Appellant had not fulfilled the conditions laid down in Notification No. 67/1995-CE. Therefore, he denied the benefit of the exemption and demanded duty on molasses. 18. Learned Counsel for the Appellant submits that the Commissioner had agreed with its submissions, that once the provisions of Rule 6 of CCR are followed, it will be entitled to the benefit of exemption notification and there is no dispute about it. The only ques....