2017 (5) TMI 1239 - AT - Central Excise

Classification of goods - rectified spirit - assessee contends that rectified spirit is finding place at tariff item no. 22072000 because ethyl alcohol and rectified spirit are not two different commodities - Held that - ethyl alcohol and rectified 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 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Central Excise Tariff regarding rectified spirit and denatured spirit.
2. Admissibility of CENVAT credit on inputs and capital goods for manufacturing denatured spirit.
3. Determination of whether ethyl alcohol and rectified spirit are distinct commodities.

Analysis:
1. The appeal was filed by the Revenue against an Order-in-Original passed by the Commissioner of Central Excise & Customs, Lucknow. The case involved a composite unit manufacturing sugar, molasses, ethyl alcohol, rectified spirit, and denatured absolute alcohol. The Revenue contended that rectified spirit does not exist in the Central Excise Tariff post-2005, affecting the admissibility of CENVAT credit for the respondent. The show cause notice proposed recovery of wrongly availed credit, leading to the impugned order dated 19.08.2013. The appellant argued that rectified spirit is essentially ethyl alcohol and should be covered under the relevant tariff item.

2. The grounds of appeal reiterated the appellant's contentions, emphasizing that rectified spirit falls under the description of ethyl alcohol as per the Central Excise Tariff. The appellant cited various case laws and a Supreme Court ruling supporting their stance. The Revenue, on the other hand, stood by the findings of the Order-in-Original, maintaining their position on the inadmissibility of CENVAT credit for inputs and capital goods used in manufacturing denatured spirit.

3. Upon considering the arguments and case records, the Tribunal examined the manufacturing process involving sugar, molasses, and ethyl alcohol. The Tribunal noted the historical classification of ethyl alcohol and rectified spirit under different subheadings pre-2005. The crucial issue revolved around whether ethyl alcohol and rectified spirit were distinct commodities or interchangeable terms. Citing a Supreme Court observation, the Tribunal concluded that ethyl alcohol and rectified spirit are synonymous, with rectified spirit being a purified form of ethyl alcohol. Consequently, the Tribunal held that rectified spirit, when not intended for human consumption, falls under the tariff item covering ethyl alcohol and denatured spirits. As a result, the show cause notice was deemed unsustainable, leading to the appeal's allowance with consequential relief.