2017 (11) TMI 649 - AT - Central Excise

CENVAT credit - Rule 6 (3A) of the CENVAT Credit Rules 2004 - rectified spirit - Held that - identical issue decided in the case of Bajaj Hindustan Sugar Ltd. Vs. CCE Lucknow 2016 (8) TMI 386 - CESTAT ALLAHABAD , where it was held that ethyl alcohol and rectification spirit are on 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 involved:
Appeal against Common Order-in-Original regarding demand of duty, interest, penalty, and appropriation of reversed duties. Admissibility of CENVAT credit on raw materials used in manufacturing excisable goods. Interpretation of Tariff item and sub-heading regarding excisability of products.

Analysis:
The appeal was filed against a Common Order-in-Original demanding duty, interest, penalty, and appropriation of reversed duties by the Commissioner of Central Excise & Service Tax, Allahabad. The appellants, engaged in manufacturing Ethyl Alcohol, Denatured Ethyl Alcohol, IMFL, and Fusel Oil, availed CENVAT credit on duties of excise paid on molasses, the raw material. The Commissioner issued show cause notices demanding duty, interest, and penalty, claiming that the CENVAT chain was broken with the production of non-excisable rectified spirit. The Commissioner confirmed the duty demand, interest, and imposed penalties, stating that Tariff item and sub-heading did not include rectified spirit, thus making it non-excisable. The appellants argued that CENVAT credit should be allowed if raw materials enrich the transaction price of final goods, citing relevant legal provisions and a Supreme Court judgment. They contended that Ethyl Alcohol and Spirit were interchangeable names for the same product, supported by Tribunal judgments in similar cases.

The Tribunal analyzed the contentions and referred to a previous judgment where it was held that rectified spirit not for human consumption is ethyl alcohol falling under the relevant tariff item. Relying on this precedent, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant. The Tribunal's decision was based on the interpretation that ethyl alcohol and rectified spirit were the same product, thus rejecting the Commissioner's argument regarding the excisability of rectified spirit and allowing the CENVAT credit on molasses used in manufacturing. The Tribunal's decision aligned with the Supreme Court's observation and previous Tribunal judgments in similar cases, emphasizing the interchangeability of terms and the admissibility of CENVAT credit based on the enrichment of transaction price.