2011 (4) TMI 438 - AT - Central Excise

Demand, interest and penalty - . The Revenue took a view that Acetone cannot be considered to be an input for the manufacture of MEG/DEG/TEG within the meaning of Cenvat Credit Rules, 2004 - the impugned order has been passed wherein it has been held that Acetone is an input for the manufacture of Ethyl Alcohol for manufacturer, who denatured the Ethyl Alcohol by using Acetone for the appellant and therefore, the CENVAT credit was not available to the appellants - Since, the very same issue had been considered by the Tribunal in the case of Laxmi Organics Industries Ltd., which was subsequently upheld by the Hon ble Bombay High Court - Further, he also contended that this has a revenue neutral situation since appellants could have reversed the CENVAT credit and sent Acetone to the manufacturer of denatured Ethyl Alcohol, who taken the credit and could have paid the duty - Decided in favour of assessee.

Summary

Issues:
1. Availability of CENVAT credit on duty paid Acetone used in the manufacture of Ethylene Glycols.
2. Interpretation of the definition of inputs under Rule 2(k) of Cenvat Credit Rules, 2004.
3. Consideration of movement of Acetone under Rule 4(5) of Cenvat Credit Rules.

Analysis:

1. The appellants, engaged in manufacturing Ethylene Glycols, used Specially Denatured Ethyl Alcohol obtained by mixing Ethyl Alcohol and Acetone. They availed CENVAT credit on duty paid Acetone used for denaturing Ethyl Alcohol. The Revenue contended that Acetone was not an input for Ethylene Glycol manufacture. An order confirmed duty demand and imposed penalties. The appellants argued citing a similar Tribunal case upheld by the Bombay High Court, claiming a revenue-neutral situation if credit was reversed and Acetone sent to the Ethyl Alcohol manufacturer.

2. The Revenue argued that Rule 2(k) of Cenvat Credit Rules specified inputs must be used within the factory, questioning the use of Acetone for denaturing Ethyl Alcohol. The Tribunal, not delving into the definition of inputs or movement procedures under Rule 4(5), referenced the Laxmi Organics case upheld by the Bombay High Court. Relying on the precedent, the Tribunal decided in favor of the appellants, citing the binding nature of the High Court's decision.

3. The Tribunal's decision was influenced by the previous ruling of the Bombay High Court, which established a precedent regarding the issue at hand. By upholding the decision in the Laxmi Organics case, the Tribunal granted consequential relief to the appellants, considering the High Court's binding authority. The movement of Acetone under Rule 4(5) and the definition of inputs were not further scrutinized due to the established legal position from the prior judicial determination.