2016 (1) TMI 63 - AT - Central Excise

Cenvat Credit - input services used in intermediate exempted goods - manufacture of rectified spirit an exempt product which have been further used in the factory of the respondent for manufacture of denatured spirit, which is cleared on payment of duty - Held that - in cases where intermediate product comes into existence, even though no duty is paid on the intermediate product as it is exempted from the duty or is chargeable to nil rate of duty, credit will still be allowable so long as duty is paid on the final product. The issue is squarely covered on all four by the ruling of the Honourable High Court and Supreme Court as relied on by the ld. Counsel for the respondent. In this view of the matter I hold that the respondent assessee is entitled to Cenvat credit on services received in the manufacture of absolute alcohol or rectified spirit, which have been further used for manufacture of denatured spirit, cleared on payment of duty. - Decided in favor of assessee.

Issues Involved:
1. Eligibility of Cenvat credit on input services utilized in the manufacture of rectified spirit, an exempt product further used in the production of denatured spirit.
2. Interpretation of Central Excise Tariff Act regarding the manufacturing process of denatured spirit.
3. Admissibility of Cenvat credit on input services for manufacturing exempted intermediate products used in the production of final dutiable products.
4. Application of Cenvat Credit Rules and relevant case laws to determine the eligibility of Cenvat credit on input services.

Issue 1: Eligibility of Cenvat Credit on Input Services:
The case involved a dispute over the entitlement of Cenvat credit on input services utilized in the manufacture of rectified spirit, an exempt product further used in the production of denatured spirit. The revenue contended that the input services were used in the manufacture of an exempt product, thereby challenging the eligibility of Cenvat credit. However, the Tribunal upheld the respondent's entitlement to Cenvat credit based on the utilization of services in the manufacturing process.

Issue 2: Interpretation of Central Excise Tariff Act:
The Tribunal analyzed the manufacturing process of denatured spirit from rectified spirit and the classification under the Central Excise Tariff Act. It was observed that the denaturation process involved additional machinery separate from that used for rectified spirit production. The Tribunal considered the marketability of rectified spirit as a final product and the exemption under the Central Excise Tariff Act for alcoholic liquor for human consumption. The judgment highlighted the distinction between excisable and non-excisable products in determining the admissibility of Cenvat credit.

Issue 3: Admissibility of Cenvat Credit on Intermediate Products:
The Tribunal examined the admissibility of Cenvat credit on input services used in the manufacturing of exempted intermediate products, which are further utilized in the production of final dutiable products. The ruling referred to previous cases where Cenvat credit was allowed for inputs used in intermediate products that ultimately led to the manufacture of taxable goods. The judgment emphasized the objective of Cenvat credit to prevent the cascading effect of duty and considered the marketability of intermediate products in determining credit eligibility.

Issue 4: Application of Cenvat Credit Rules and Precedents:
The judgment referenced legal precedents and case laws to support the respondent's claim for Cenvat credit on input services. Various rulings from High Courts and the Supreme Court were cited to establish the principle that duty payment on the final product allows for credit on inputs, even if intermediate products are exempted or non-taxable. The Tribunal relied on these interpretations to dismiss the revenue's appeal and affirm the respondent's entitlement to Cenvat credit.

In conclusion, the Tribunal dismissed the revenue's appeal and upheld the respondent's entitlement to Cenvat credit on input services utilized in the manufacturing process. The decision was based on legal interpretations, precedents, and the objective of Cenvat credit to prevent duty cascading. The judgment provided a detailed analysis of the issues involved, considering the manufacturing processes, marketability of products, and relevant legal principles to arrive at the final ruling.

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