2017 (5) TMI 1240 - AT - Central Excise

Classification of goods - rectified spirit - whether classified under CTH 22072000 or under CTH 2204.90? - Held that - the appellant have a composite unit where sugar and molasses are manufactured. Further the molasses on fermentation in the distillery ethyl alcohol is obtained. Ethyl alcohol is denatured by mixing certain chemicals which make ethyl alcohol unfit for human consumption. Before 01.03.2005 chapter Sub heading 2204.10 covered denatured ethyl alcohol of any strength and chapter Sub heading no. 2204.90 covered ethyl alcohol except alcoholic liquor for human consumption and undenatured ethyl alcohol. From 01.03.2005 tariff item no. 22072000 covered ethyl alcohol and other spirits denatured of any strength. The 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:
- CENVAT credit availability for inputs in the manufacture of denatured spirit
- Classification of rectified spirit under Central Excise Tariff
- Admissibility of CENVAT credit for capital goods and input services

Analysis:
1. CENVAT Credit Availability: The appellant, a composite unit with a sugar mill and distillery division, faced disputes regarding the availability of CENVAT credit for inputs in the manufacture of denatured spirit. The revenue contended that due to the emergence of rectified spirit during fermentation of molasses, CENVAT credit on inputs and capital goods going into the manufacture of denatured spirit was not available. Show cause notices were issued, proposing recovery of allegedly wrongly availed CENVAT credit, along with interest and penalties. The original authority upheld the demand, leading to the appeal.

2. Classification of Rectified Spirit: The core issue revolved around the classification of rectified spirit under the Central Excise Tariff. The revenue argued that post-2005 changes in the tariff did not include rectified spirit, impacting the admissibility of CENVAT credit. The appellant's defense highlighted the continuous process of manufacturing denatured spirit from fermentation of molasses, emphasizing that rectified spirit was essentially ethyl alcohol and should be classified under tariff item no. 22072000.

3. Admissibility of CENVAT Credit: The appellate tribunal analyzed the contentions of both parties, considering the historical classification of ethyl alcohol and rectified spirit. Referring to a Supreme Court ruling, the tribunal concluded that ethyl alcohol and rectified spirit were essentially the same, with rectified spirit being a purified form of ethyl alcohol. Therefore, rectified spirit, when not intended for human consumption, was deemed to fall under tariff item no. 22072000, making it eligible for CENVAT credit. The tribunal set aside the impugned orders, allowing the appeals with consequential relief and no costs.

This detailed analysis of the judgment showcases the complexities surrounding CENVAT credit availability, classification under the Central Excise Tariff, and the interpretation of legal provisions and precedents in resolving disputes related to excisable products and their manufacturing processes.