2009 (9) TMI 863 - AT - Central Excise

Benefit of N/N. 67/95-C.E. dated 16-3-95 - The appellants have paid 8% on the rectified spirit but since the period is prior to the amendment of the N/N. 67/95, the lower appellate authority has not allowed the benefit of Notification to the appellants - Held that - only alcoholic liquor for home consumption is specifically excluded from the union list and hence it requires to be effectively verified that the undenatured ethyl alcohol (rectified spirit) cleared by the appellants without payment of duty is actually alcoholic liquor for home consumption. Subject to this aspect being verified, the appellants will be entitled to the exemption in respect of molasses under Notification No. 67/95 without being hit by the proviso thereon - appeal allowed by way of remand.

Summary

Issues:
1. Demand raised on molasses used in the production of undenatured ethyl alcohol.
2. Applicability of Notification No. 67/95-C.E. for exemption on molasses.
3. Classification of undenatured ethyl alcohol as excisable goods.
4. Verification requirement for undenatured ethyl alcohol clearance without duty payment.
5. Cross objection filed by the department against stay orders.

Analysis:
1. The appellants, sugar manufacturers, faced a demand on molasses used in producing undenatured ethyl alcohol. They paid 8% on rectified spirit under Rule 57CC, assuming it necessary due to input duty credit taken. The department's demand was at Rs. 500/- per MT for molasses used in undenatured ethyl alcohol production.

2. The appellants claimed exemption under Notification No. 67/95-C.E. for molasses. The exemption applied to inputs used in manufacturing final products, subject to the proviso excluding exemption if final products were exempted or at nil duty rate. An amendment allowed exemption even for exempted or nil rated final products if 8% was paid under Rule 57AD.

3. The appellants argued that undenatured ethyl alcohol was not excisable, being outside central excise levy scope. To be excisable, goods must be subject to excise duty under the Central Excise Act, 1944. Since undenatured ethyl alcohol was not subject to excise duty, it could not be considered exempted or nil rated.

4. The Tribunal noted that undenatured ethyl alcohol clearance without duty payment required verification if it was actually alcoholic liquor for home consumption. Pending this verification, the appellants were entitled to molasses exemption under Notification No. 67/95 without proviso implications. The matter was remanded for original authority review.

5. The department's cross objection against stay orders was rejected as no provision allowed such objections. The Tribunal pronounced the operative part of the order on 22-9-2009, setting aside previous orders and remanding the matter for verification regarding undenatured ethyl alcohol classification.