2017 (4) TMI 981 - AT - Central Excise

Liability of interest - delayed payment of duty on molasses - case of appellant is that as the molasses were common inputs for rectified spirit (exempted) and denatured spirit (dutiable) they reversed the proportionate credit in terms of Rule 6 of CCR, 2004 - Department entertained a view, that molasses is not common input for rectified spirit and denatured spirit for the reason that the appellants are manufacturing only rectified spirit from molasses - denial of exemption N/N. 67/95-CE dated 16.03.1995 - Held that - molasses is a common input for appellant for manufacture of rectified spirit and denatured spirit. Accordingly, appellants are eligible for the exemption under N/N. 67/1995 dated 16.03.1995 - In order to avail the exemption under N/N. 67/95 the appellant has to comply with the procedure prescribed in terms of Rule 6 of CCR. In doing so, it is not practical for appellant to pay duty on molasses at the time of clearance - When the appellants are eligible for benefit of N/N. 67/95 they cannot be compelled to pay interest alleging delay in payment of duty on molasses cleared and used by them - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of interest on delayed payment of duty on molasses; Applicability of Notification No.67/95-CE; Reversal of proportionate credit under Rule 6 of CENVAT Credit Rules, 2004; Eligibility for exemption under Notification No.67/95; Interest liability on reversal of duty; Allegation of violation of conditions of Notification No.67/95-CE.

Analysis:
The appeal was filed against the demand of interest on delayed payment of duty on molasses. The appellants had a composite unit for the manufacture of various products. The issue arose from the use of molasses as inputs for the production of rectified spirit and denatured spirit. The department alleged that the appellants were not entitled to exemption under Notification No.67/95-CE and should have paid duty at the time of clearance of molasses. The original authority confirmed the demand of interest for the normal period but set aside the balance demand for the extended period. Both the assessee and the department filed appeals against this order. The Commissioner (Appeals) allowed the department's appeal, leading to the current appeal by the assessee.

The main contention was whether the appellants were using molasses as a common input for both dutiable and exempted products. The Tribunal had previously ruled in favor of the appellants, stating that molasses was a common input for both products. The benefit of exemption under Notification No.67/95-CE could not be denied to the appellants based on this ruling. The appellants had complied with the conditions of the notification by reversing proportionate credit under Rule 6 of CENVAT Credit Rules, 2004.

The Commissioner (Appeals) considered the law correctly and set aside the interest demand, as the appellants were eligible for the benefit of Notification No.67/95. The reversal of amount under Rule 6 should be concurrent with the clearance of the exempted goods, not the clearance of molasses for captive use. Therefore, no interest liability existed, and the demands for interest had to be set aside. The impugned order confirming the interest demand was deemed unsustainable, and the appeal was allowed with consequential reliefs.

In conclusion, the judgment clarified the applicability of Notification No.67/95-CE, the reversal of proportionate credit under Rule 6, and the interest liability on such reversal. The decision favored the appellants, emphasizing their eligibility for exemption and the incorrectness of the interest demands based on the reversal of duty.