2016 (3) TMI 1161 - AT - Central Excise

Cenvat credit - Capital goods used in the manufacture of dutiable and exempted goods - Time limitation - Held that - From the process of manufacture of Rectified Spirit (RS) and Denatured Spirit (DNS) detailed above it is observed that capital goods are used upto the rectifier column where Rectified Spirit (RS) is stored - As it is evident from fact on record that the capital goods have been used by the respondent for processing of dutiable as well as exempted goods. In that circumstances I do agree with the observation made by the ld. Commissioner (A) holding that respondent is entitled to avail Cenvat credit on the capital goods in question - Appeal dismissed

Summary

Issues:
1. Entitlement to Cenvat credit on capital goods used for manufacturing both dutiable and exempted final products.

Analysis:
The appeal was filed by the revenue against the decision of the ld. Commissioner (Appeals) who allowed Cenvat credit on capital goods used by the respondent for manufacturing both dutiable and exempted final products. The respondent was engaged in manufacturing Rectified Spirit, Extra Neutral Alcohol, Fermentation & Distillation, Fusel Oil, and CO2 gas. The revenue contended that capital goods used in processing Rectified Spirit, an exempted product, were not eligible for Cenvat credit. Consequently, proceedings were initiated, and duty along with penalties was imposed. The ld. Commissioner (A) examined the manufacturing process and allowed the Cenvat credit on capital goods used for both dutiable and exempted products. The revenue challenged this decision, leading to the appeal.

The main issue revolved around whether the respondent used the capital goods for processing both Rectified Spirit and Denatured Spirit or predominantly for Rectified Spirit. The ld. AR argued that as the capital goods were not used in processing Denatured Spirit, the respondent should not be entitled to Cenvat credit. Conversely, the ld. Counsel for the respondent supported the decision of the ld. Commissioner (A).

The ld. Commissioner (Appeals) analyzed the process of manufacturing Rectified Spirit and Denatured Spirit. It was observed that capital goods were used up to the rectifier column where Rectified Spirit was stored, and the process of manufacturing Denatured Spirit started after this point. The Adjudicating Authority held that the capital goods used for Cenvat credit were not involved in the manufacture of Denatured Spirit. The respondent argued that the capital goods were used for both products, citing expert opinions and examples of direct sales of Rectified Spirit after payment of central excise duty to various institutions and industries.

Ultimately, it was established that the capital goods were indeed used by the respondent for processing both dutiable and exempted goods. Therefore, the decision of the ld. Commissioner (A) allowing Cenvat credit on the capital goods was upheld, and the appeal filed by the revenue was dismissed.