2017 (9) TMI 1690 - AT - Central Excise

CENVAT Credit - whether the appellant, a manufacturer of sugar and molasses and also having a distillery division, whether Cenvat credit have been rightly denied? - Benefit of N/N. 67/95-CE - SCN contents that rectified spirit is manufactured in between the process to manufacture denatured spirit and rectified spirit does not find place in Central Excise Tariff with effect from 01.03.2005 and therefore CENVAT credit is not admissible as inputs & input services and capital goods going into manufacture of rectified spirit. Whether ethyl alcohol and rectified spirit are two different commodities or one and the same commodity? Held that - The ethyl alcohol and rectification spirit are one and the same - rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - SCN not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit to a manufacturer of sugar and molasses with a distillery division.
2. Denial of benefit under Notification No.67/95-CE on molasses cleared from sugar mill to distillery.
3. Disallowance of Cenvat credit on molasses procured from outside for alleged non-excisable Rectified Spirit.

Analysis:
1. The main issue in the appeals was whether the appellant, engaged in manufacturing sugar, molasses, and operating a distillery division, was rightly denied Cenvat credit. Additionally, the denial of the benefit of Notification No.67/95-CE on molasses cleared from the sugar mill to the distillery was also contested. The Tribunal found that the final product, Rectified Spirit, did not fall under the First/Second schedule to the Central Excise Tariff Act, 1985, thus being considered a non-excisable product. Cenvat credit was disallowed due to the alleged wrong availment of credit on molasses procured from outside and used in relation to the non-excisable Rectified Spirit.

2. After hearing both parties and considering the contentions, the Tribunal referred to a precedent order involving a similar case. The Tribunal highlighted that the appellant had a composite unit where sugar and molasses were manufactured, and ethyl alcohol was obtained from molasses through fermentation in the distillery. The Tribunal analyzed the changes in tariff items concerning ethyl alcohol and spirits, emphasizing that Rectified Spirit was considered ethyl alcohol not meant for human consumption. The Tribunal referenced the observations of the Hon’ble Supreme Court, which clarified that ethyl alcohol and rectified spirit were essentially the same commodity. Consequently, the Tribunal held that Rectified Spirit, when not used for human consumption, was indeed ethyl alcohol and fell under a specific tariff item, thus rendering the show cause notice unsustainable.

3. In conclusion, the Tribunal allowed the appeals, setting aside the impugned order and granting the appellant consequential benefits as per the law. The Miscellaneous Applications were also disposed of in line with the decision. The judgment was delivered by Member (Judicial) Anil Choudhary, with the support of Member (Technical) Anil G. Shakkarwar, in favor of the appellant, providing clarity on the issues of Cenvat credit denial and the applicability of Notification No.67/95-CE in the context of manufacturing operations involving sugar, molasses, and Rectified Spirit.