2017 (10) TMI 1027 - AT - Central Excise

N/N. 67/95-CE, dated 16/03/1995 - proprotionate credit in respect of Rectified Spirit (RS), Ethyl Alcohol (ENA), Power Alcohol, Absolute Alcohol, Bagasse, Press Mud, Electricity & Bio compost - Captive Consumption of Molasses - Manufacturing of Rectified Spirit and ENA - According to Revenue, Rectified Spirit and ENA are non-excisable goods with effect from 1.3.2005 and therefore, the appellants are not eligible to avail benefit of exemption N/N. 67/95-CE on Molasses captively used in the manufacture of Rectified Spirit and ENA - Held that - Similar matter again came before the Tribunal and in the case of Rajshree Sugars & Chemicals Ltd. V/s CCE, Puducherry 2014 (11) TMI 919 - CESTAT CHENNAI , and therein it was held that benefit under N/N. 67/95-CE is available provided the assessee discharges the obligation of reversal of cenvat credit availed on duty paid on molasses used for manufacture of Rectified Spirit and denatured Spirit as required under Rule 6 (1) of CCR,2004. Thus, the department s contention that Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) are not excisable is of no consequence in the light of the Tribunal s decision in case of Rajshree Sugars & Chemicals Ltd. The assessee appellant would be entitled to the benefit of exemption under N/N. 67/95 CE (supra); if from the records of the appellant it is confirmed that they reversed or paid the Cenvat credit pertaining to the inputs in the products not chargeable to any duty or where products were exempted or were non excisable - matter is remanded to the original adjudicating authority to verify the fact of reversal or payment of Cenvat credit pertaining to inputs in the products not chargeable to any duty or where they are exempted or non-excisable - matter on remand. CENVAT credit - demand of ₹ 48,48,388/- mainly on the reason that this amount of Cenvat credit pertains to the inputs and input services used in the manufacture of exempted goods namely, electricity, press mud, bagasse - Held that - adjudicating authority has not thoroughly examined the submissions of the appellant that subject cenvat credit had already been reversed in case of confirmation of recovery of demand of Cenvat Credit amounting to ₹ 48,48,388/-. Therefore, in case of this demand also, the matter needs denovo adjudication by the Original Adjudicating Authority - matter on remand. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Denial of Cenvat credit and recovery along with interest and penalties.
2. Eligibility for exemption under Notification No. 67/95-CE for molasses used in the manufacture of non-excisable goods.
3. Proportionate reversal of Cenvat credit on inputs and input services used in the manufacture of non-excisable goods.
4. Confirmation of demand on inputs and input services used in the manufacture of exempted goods like electricity, press mud, and bagasse.

Detailed Analysis:

1. Denial of Cenvat Credit and Recovery:
The appellant, M/s Damlia Bharat Sugar and Industries Ltd., was denied Cenvat credit and faced recovery along with interest and penalties under Order in Original No. 51-53/2013 dated 04/09/2013. The appellant utilized common inputs and input services for manufacturing both dutiable and exempted goods without maintaining separate accounts, opting instead for proportionate reversal of Cenvat credit under Rule 6(3A) of the Cenvat Credit Rules, 2004.

2. Eligibility for Exemption under Notification No. 67/95-CE:
The appellant argued that they reversed the Cenvat credit on molasses used for manufacturing non-excisable goods, thus qualifying for exemption under Notification No. 67/95-CE. The revenue contended that since Ethyl Alcohol, Rectified Spirit (RS), and Extra Neutral Alcohol (ENA) are non-excisable, the exemption does not apply. The Tribunal referred to the case of Sakthi Sugars Ltd. v/s CCE, Salem, where it was held that if Cenvat credit attributable to inputs in exempted products is reversed, the benefit of Notification No. 67/95-CE is available. The Tribunal remanded the matter to verify if the appellant reversed the Cenvat credit pertaining to inputs in non-excisable products.

3. Proportionate Reversal of Cenvat Credit:
The revenue's stand was that the appellant wrongly availed Cenvat credit on molasses used in the manufacture of non-excisable goods. The Tribunal noted that if the appellant reversed or paid the Cenvat credit pertaining to inputs in non-excisable products, they would be entitled to the benefit of Notification No. 67/95-CE. The matter was remanded to the original adjudicating authority to verify this fact and pass a fresh order.

4. Confirmation of Demand on Inputs and Input Services:
The impugned order confirmed a demand of ?48,48,388/- on the grounds that this amount of Cenvat credit pertained to inputs and input services used in the manufacture of exempted goods like electricity, press mud, and bagasse. The appellant argued that the computation was incorrect and that they had already reversed the Cenvat credit by considering their Sugar and Distillery Sections as parts of one integrated factory. The Tribunal found that the adjudicating authority had not thoroughly examined the appellant's submissions and remanded the matter for denovo adjudication, directing the authority to provide an opportunity for personal hearing and submission of documents.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal by way of remand, directing the original adjudicating authority to verify the reversal or payment of Cenvat credit and re-adjudicate the matter within four months, providing necessary opportunities for personal hearing and submission of documents to the appellant.