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2017 (12) TMI 314 - AT - Central ExciseCENVAT credit - manufacture of dutiable as well as exempt goods - Un-Denatured Ethyl Alcohol/ Rectified Spirit - Whether Un-Denatured Ethyl Alcohol/ Rectified Spirit manufactured by the assessee are exempted goods in terms of Rule 2(d) of the CCR, 2004 and consequently, whether the provisions of Rule 6(3) of the CCR, 2004, apply to the present case? - Whether the assessee is liable to pay 10% of the value of Un-Denatured Ethyl Alcohol/Rectified Spirit at all in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2004?? - Held that - Under CCR, 2004, where an assessee manufacturer dutiable and non-dutiable product from the same input, Rule 6(2) provides that the manufacturer has to maintain separate accounts and inventory of the inputs used in dutiable and non-dutiable products. If it is not possible to maintain such separate accounts, Rule 6(3) demands payment of an amount as calculated under Rule 6 (3)(a) or 6(3) (b) - Admittedly, the appellants have not maintained separate accounts. However, after January, 2006, the appellants reversed 10% of the price of Un-Denatured Ethyl Alcohol in terms of Rule 6(3)(b). Whether with effect from 01.03.2005 Un-Denatures Ethyl Alcohol is an exempted product-as alleged by department or non-excisable product as contended by appellant? - Held that - The erstwhile Tariff Heading 22.04 covered by both Denatured and Un-Denatured Ethyl Alcohol. The Denatured Ethyl Alcohol was subject to 16% duty. Alcohol other than Denatured Ethyl Alcohol (Un-Denatured Ethyl Alcohol) carried NIL rate of duty. In the revised Tariff Schedule (w.e.f. 01.03.2005), there is no corresponding Heading/sub-heading for Undenatured Ethyl Alcohol. The Central Excise as well as Customs Tariff was aligned and in the Customs Tariff Schedule Un-Denatured Ethyl Alcohol falls under Tariff heading 22.08. is left blank without mentioning any goods. From the above, it can be seen that the arguments of the learned counsel for appellant that w.e.f. 01.03.2005, Un-Denatured Ethyl Alcohol is non- excisable is not without force. Un-Denatured Alcohol are not specified goods under Rule 6(3)(a) and the demand is unjustified - appellant is not liable to pay 10% of the price in terms of Rule 6(3)(b) of CCR, 2004. Appeal allowed - decided in favor of appellant.
Issues involved:
1. Availment of Cenvat credit on molasses used for manufacturing Denatured and Un-Denatured Ethyl Alcohol. 2. Allegation of contravening Rule 6(3)(a) of Cenvat Credit Rules, 2004. 3. Appeal against the demand raised and penalties imposed. 4. Interpretation of Rule 6(3)(b) regarding payment of 10% of the price of Un-Denatured Ethyl Alcohol. 5. Determination of whether Un-Denatured Ethyl Alcohol is exempted goods or non-excisable goods. 6. Requirement to maintain separate accounts for dutiable and non-dutiable goods. 7. Adjudication based on the remand order of the Hon'ble Madras High Court. Analysis: 1. The appellant, engaged in manufacturing Sugar, Denatured Ethyl Alcohol, and Un-Denatured Ethyl Alcohol, faced allegations regarding the availment of Cenvat credit on molasses used for manufacturing these products. The department contended that the Un-Denatured Alcohol removed by the appellant was excisable exempted goods, leading to contravention of Rule 6(3)(a) of Cenvat Credit Rules, 2004. 2. The appellant appealed against the demand raised and penalties imposed, arguing that the Un-Denatured Ethyl Alcohol was not excisable goods, and hence, separate accounts were not required. The department insisted on reversing the entire credit attributable to the inputs used for manufacturing Un-Denatured Ethyl Alcohol under Rule 6(3)(a). 3. The interpretation of Rule 6(3)(b) was crucial, as the appellant contended that they reversed 10% of the price of Un-Denatured Ethyl Alcohol under pressure from the department, without being obligated to do so. The appellant disputed the department's demand for the full credit reversal. 4. The determination of whether Un-Denatured Ethyl Alcohol was classified as exempted goods or non-excisable goods was essential in resolving the dispute. The change in the Tariff system and the absence of a specific heading for Un-Denatured Ethyl Alcohol post the 8-digit coding system implementation played a significant role in this analysis. 5. The issue of maintaining separate accounts for dutiable and non-dutiable goods was central to the case, as the appellant argued against the necessity of such segregation based on the nature of the final products and the applicable rules. 6. The adjudication process was guided by the remand order of the Hon'ble Madras High Court, which outlined specific points for consideration, including the failure to maintain separate accounts, the classification of Un-Denatured Ethyl Alcohol, and the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004. This detailed analysis covers the key issues involved in the legal judgment, providing a comprehensive understanding of the case and the arguments presented by the appellant and the department.
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