2010 (9) TMI 792 - Commissioner - Central Excise

Cenvat credit - Confiscation and penalty - stay application - whether the ethyl alcohol (other than denatured) is non-excisable - Ethyl alcohol (other than denatured) falling under 2204.90 of earlier Six digit tariff are obviously an excisable product cannot become a non-excisable with introduction of Eight digit tariff. Ethyl alcohol (other than denatured) is an excisable product therefore in Notification No. 3/2005-C.E. dated 24-2-2005 it was included at Sr. No. 14 so as to PRESERVE the then existing duty structure Held that - Once it is proved that the product in question is excisable there is no question of denying the option under sub-rule 3(1) of Rule 6 of Cenvat Credit Rules 2004 availed by appellant as a result no liability of differential Cenvat credit as alleged in the SCN arises when there is no contravention of any of the provisions of the Central Excise Act confiscation ordered and the penalties imposed needs to be set aside appeal is allowed

Summary

Issues:
1. Admissibility of Cenvat credit on Molasses used for manufacturing Ethyl Alcohol and Alcoholic Liquor.
2. Alleged evasion of Central Excise duty by reversing lesser Cenvat Credit than actually taken on molasses quantity.
3. Confiscation of molasses and imposition of penalties and interest.
4. Interpretation of excisability of Ethyl Alcohol (other than denatured) under the Central Excise Tariff Act, 1985.

Analysis:
1. The appeal and stay application were filed against the Order in Original (OIO) confirming the demand for inadmissible differential Cenvat Credit on Molasses used for manufacturing Ethyl Alcohol and Alcoholic Liquor. The show cause notice proposed recovery under Section 11A(1) of the Central Excise Act, 1944. The appellant contested the demand, citing the admissibility of Cenvat credit and challenging the amount claimed.

2. The OIO confirmed the demand for differential Cenvat Credit, appropriated the amount already paid, ordered the recovery of interest, and imposed penalties. Additionally, it ordered the confiscation of molasses with an option for release on payment of a redemption fine. The appellant challenged the confiscation and penalties imposed, arguing that the goods were not available for confiscation.

3. The main issue revolved around the excisability of Ethyl Alcohol (other than denatured). The appellant contended that Ethyl Alcohol falls under a specific tariff heading and is an excisable product exempted under Notification No. 3/2005. The appellant relied on case laws supporting their position and argued that the product in question is excisable, thus justifying the admissibility of Cenvat credit on molasses.

4. The Commissioner analyzed the tariff structure pre and post the introduction of the Eight-digit tariff code. It was established that Ethyl Alcohol (other than denatured) was excisable under the earlier Six-digit tariff and remained so under the new tariff structure. The Commissioner referred to Circulars clarifying the preservation of duty rates and concluded that the product in question was excisable, thereby nullifying the alleged liability of differential Cenvat credit.

5. Consequently, the Commissioner set aside the OIO, ruling in favor of the appellant. The decision was based on the excisability of Ethyl Alcohol (other than denatured) and the preservation of existing duty structures under the relevant notifications. The confiscation of molasses and penalties imposed were deemed unwarranted in the absence of contraventions of the Central Excise Act.

In conclusion, the judgment favored the appellant by allowing the appeal, setting aside the OIO, and providing consequential relief. The decision hinged on the excisability of Ethyl Alcohol (other than denatured) and the preservation of duty structures under the relevant notifications and tariff classifications.