2012 (12) TMI 922 - AT - Central Excise

Reversal of CENVAT Credit - whether the appellants are required to reverse actual amount of Modvat/Cenvat credit availed on the Molasses used for manufacture of rectified spirit consumed by them in their liquor manufacturing section for manufacture of Indian Made Liquor (IML) or can the appellants reverse 8% of the value of rectified spirit as provided under Rule 57CC - Held that - Any intermediate product can be an intermediate product for the purpose of manufacture of IMFL but by itself it is final product also. Rectified spirit is sold in the market. Thus it is an excisable product falling under chapter sub heading 2204.90. IMFL is non-excisable product. Rule 57CC speaks of final product as exempt or chargeable to nil rate of duty. Thus it will cover only excisable product and not non-excisable product. Hence, we hold that IMFL is not a final product in the instant case. We are therefore left only with the rectified spirit. Rectified spirit is an excisable product as it is classifiable under Chapter 22. Thus both the words Exempt from the whole of duty of excise or chargeable to nil rate of duty will be applicable to rectified spirit. Rectified spirit is also cleared as rectified spirit and therefore, an amount of 8% of the price shall be reversible. We accordingly hold that 8% of the sale price of extra neutral alcohol and rectified spirit which are chargeable to nil rate of duty while removing from the factory shall be debitable and hence is sustainable in law - Following decision of COMMISSIONER OF C. EX., LUCKNOW Versus KESAR ENTERPRISES LTD. 2000 (8) TMI 175 - CEGAT, NEW DELHI - Decided in favour of assessee.

Summary

Issues:
- Appellant filed an appeal against the order passed by the Commissioner of Central Excise, Nasik regarding Modvat credit on duty paid on molasses.
- Interpretation of Rule 57CC of the Central Excise Rules regarding reversal of credit on molasses used in the manufacture of excisable goods.

Analysis:
1. The appellants, engaged in sugar and molasses manufacturing, availed Modvat credit on duty paid on molasses for further production of ethyl alcohol. The issue revolved around whether the appellants should reverse the entire credit on molasses or 8% of the value of potable ethyl alcohol consumed in the manufacture of excisable goods. The Tribunal referred to previous decisions to settle the matter.

2. The Tribunal cited the cases of CCE vs Kesar Enterprises Ltd and Ugar Sugar Works Ltd vs CCE to support its decision. The Tribunal emphasized that the appellants were entitled to avail Modvat credit on molasses and were required to pay 8% of the value of rectified spirit cleared for the manufacture of Indian Made Liquor (IML) under Rule 57CC. The Tribunal clarified that the Rule applied to excisable products, not non-excisable ones like IML.

3. The Tribunal highlighted that rectified spirit, an excisable product, was the final product in question, not IML. Therefore, the 8% reversal of credit was applicable to rectified spirit, which falls under Chapter 22 of the excise classification. The Tribunal rejected the department's claim and allowed the appeal based on the precedent set by earlier decisions.

4. Upholding the decisions in previous cases, the Tribunal set aside the impugned order and allowed the appeal, stating that the appellants were correctly availing Modvat credit on molasses and were liable to reverse only 8% of the value of rectified spirit used in the production of excisable goods. The Tribunal concluded that the department's argument did not hold merit in light of established legal interpretations.

In conclusion, the Tribunal's judgment clarified the application of Rule 57CC in the context of availing Modvat credit on molasses for the manufacture of excisable goods, emphasizing the distinction between excisable and non-excisable products in determining the reversal of credit. The decision provided a clear precedent for similar cases and upheld the appellants' right to avail the credit in accordance with the relevant rules and legal interpretations.