2006 (7) TMI 464 - AT - Central Excise

Summary

Issues:
1. Transitional credit on exempted rectified spirit and neutral spirit.
2. Denial of benefit under Rule 57D(2) by Revenue.
3. Admissibility of credit on Molasses for manufacturing neutral spirit and rectified spirit.

Transitional Credit on Exempted Rectified Spirit and Neutral Spirit:
The appellant manufactured rectified spirit and neutral spirit falling under different headings of CETA, 1985, with the former being dutiable and the latter exempt from Central Excise duty. The appellant availed credit on Molasses used as an input for manufacturing both spirits. The lower authorities disallowed transitional credit on the exempted spirits. The Commissioner (Appeals) set aside the disallowance, allowing transitional credit. The Revenue contested this, arguing that as neutral spirit and rectified spirit were chargeable to nil rate of duty, transitional credit was not admissible. The Tribunal, after considering submissions, rejected the Revenue's application, upholding the Commissioner (Appeals) decision.

Denial of Benefit under Rule 57D(2) by Revenue:
The Revenue sought to deny the benefit granted by the Commissioner (Appeals) based on Rule 57D(2), claiming that neutral spirit and rectified spirit, being chargeable to nil rate of duty, were not eligible for transitional credit, whether as intermediate or finished products. Additionally, the Revenue cited Rule 57CC(9) to argue that clearances made with partial payment did not render the goods as duty paid, thus contending that credit on Molasses for manufacturing the spirits was inadmissible. However, the Tribunal found sufficient reasons to reject the Revenue's application, indicating that the Commissioner (Appeals) decision was justified in allowing transitional credit.

Admissibility of Credit on Molasses for Manufacturing Neutral Spirit and Rectified Spirit:
The issue of admissibility of credit on Molasses for manufacturing neutral spirit and rectified spirit arose in the context of the dispute over transitional credit. The Revenue contended that the clearances made with partial payment did not qualify for transitional credit. The Tribunal, after considering the arguments presented by both parties, rejected the Revenue's stance, affirming the admissibility of transitional credit on Molasses for the manufacture of the exempted spirits. The decision upheld the Commissioner (Appeals) ruling in favor of allowing transitional credit, emphasizing the eligibility of such credit despite the nil rate of duty applicable to the spirits.