2016 (8) TMI 386 - AT - Central Excise

Cenvat credit - Recovery - wrong availment on rectified spirit - Whether ethyl alcohol and rectified spirit are two different commodities or one and the same commodity - Held that - the ISI specifications had divided ethyl alcohol into several kinds of alcohol. Beverages and industrial alcohols were clearly and differently treated. Rectified spirit for industrial process was defined as spirit purified by distillation having a strength of not less than 95% by volume of ethyl alcohol. Therefore, it is very clear from the observation of Hon ble Supreme Court that ethyl alcohol and rectification spirit are one and the same. Hence,the rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Demand of CENVAT credit on inputs and capital goods.
2. Interpretation of Central Excise Tariff regarding rectified spirit.
3. Admissibility of CENVAT credit for manufacturing denatured spirit.

Analysis:
1. The appellant, a composite unit with a sugar mill and distillery division, faced a demand for wrongly availed CENVAT credit of ?9,51,11,791. The issue revolved around the manufacturing process of rectified spirit and denatured spirit. The appellant contended that rectified spirit is essentially ethyl alcohol and falls under tariff item no. 22072000. The original authority confirmed the demand, leading to the appeal.

2. The central issue was whether rectified spirit is distinct from ethyl alcohol and whether it is covered under the Central Excise Tariff. The appellant argued that rectified spirit is ethyl alcohol and relied on various legal precedents to support their claim. The revenue representative, however, supported the original authority's findings.

3. Upon careful consideration, the Tribunal analyzed the manufacturing process and the relevant tariff items. They referred to a Supreme Court ruling highlighting that ethyl alcohol and rectified spirit are synonymous. Consequently, the Tribunal concluded that rectified spirit, when not intended for human consumption, is indeed ethyl alcohol falling under tariff item no. 22072000. As a result, the show cause notice demanding CENVAT credit was deemed unsustainable, leading to the appeal's success with consequential relief granted.