2016 (7) TMI 1168 - AT - Central Excise

Refund claim - Appellant has discharged duty on the molasses used in manufacture of ethyl alcohol while being processed for ethyl alcohol, the industrial alcohol that came out has suffered duty - prayer of the appellant is that the output (industrial alcohol) which has suffered duty should be set off against the input duty paid on molasses - Held that - Commissioner confused without going into detail as to whether the molasses suffering duty has given rise to the dutiable product called industrial alcohol and non-dutiable product called portable alcohol and whether the industrial alcohol has suffered duty. For the misconception of the fact by the appellate authority, justice is to be advanced to the appellant since the facts are as narrated above remained disputed by Revenue. In view of the established fact as argued by appellant and also appreciating the jurisprudence of cascading effect appellant is entitled to refund to the extent the refund flows upon adjustment of duty paid on molasses used for manufacture of dutiable output and duty therein paid. In the result, all the five appeals are allowed and refund is to be allowed by Adjudicating authority in accordance with law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Set-off of duty paid on molasses against duty on industrial alcohol for refund.

Analysis:
The appellant, a manufacturer of sugar, produces molasses as a by-product, which is processed into ethyl alcohol. The ethyl alcohol is either portable (non-excisable) or industrial (excisable at 18% duty). The appellant paid duty on molasses used in ethyl alcohol production, and the industrial alcohol also incurred duty. The appellant sought a refund by setting off the duty paid on molasses against the duty on industrial alcohol. The adjudicating authority understood this process but the Commissioner (Appeals) did not, leading to the denial of the refund.

The Revenue supported the Commissioner's decision, but the Tribunal found that the factual aspect was not adequately addressed in the orders. The Commissioner failed to determine if the duty-paid molasses resulted in dutiable industrial alcohol and non-dutiable portable alcohol, and if the industrial alcohol was dutiable. Due to this misconception, the Tribunal concluded that justice must be served to the appellant, as the facts presented were disputed by the Revenue.

Considering the established facts and the principle of cascading effect, the Tribunal held that the appellant was entitled to a refund based on the adjustment of duty paid on molasses used in the production of dutiable output and the duty paid on the industrial alcohol. Consequently, all five appeals were allowed, and the Adjudicating authority was directed to grant the refund in accordance with the law.