2018 (5) TMI 600 - AT - Central Excise

Revenue neutrality - un-denatured alcohol/ethanol - classification of goods - Held that - It can be seen that appellant had discharged more duty on un-denatured alcohol. If it is the case of Revenue that duty should not have been paid on un-denatured alcohol, then the amount which has been collected by Revenue needs to be refunded to the appellant as the amounts retained are not in accordance with the law - Since appellant s Counsel is not pressing the point of classification of ethanol on the ground that appellant has already discharged the duty on final products un-denatured alcohol which they should not have, we hold that due to revenue neutral situation, entire case has become one of academic exercise of no consequence. Duty on captively consumed molasses - Held that - appellant could have entertained the bona fide belief that they need not discharge duty on captively consumed molasses as they were paying duty on un-denatured alcohol/ethanol. Extended period of limitation - penalty - Held that - there was a stand off between the appellant and department as to discharge of duty liability on un-denatured alcohol/ethanol and it was categorically disclosed in the periodical returns filed with department tends credence to plea that extended period could not have been invoked - the entire issue was that of mis-interpretation, hence penalty imposed on the appellants are unwarranted. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Classification of un-denatured ethanol
- Liability to pay central excise duty on molasses
- Invocation of extended period for raising demands
- Imposition of penalties and interest

Classification of un-denatured ethanol:
The appellant, a manufacturer of sugar, classified ethanol under Chapter 2938 for paying central excise duty with cess. Revenue contended that ethanol falls under Chapter heading No. 2207 and is exempt from duty payment. Show cause notices were issued demanding duty on molasses captively consumed for manufacturing ethanol, which is exempted. The adjudicating authority held that ethanol is classifiable under Chapter 22, exempt from duty, and penalties were imposed.

Liability to pay central excise duty on molasses:
The appellant argued that they discharged excess duty on ethanol, which was within the knowledge of the department. They cited previous orders and Supreme Court judgments to support their position that extended period cannot be invoked. The appellant believed they were not required to pay duty on molasses as they were paying duty on ethanol. The Tribunal found the issue to be one of revenue neutrality, as the duty paid on ethanol exceeded the demand on molasses, leading to the setting aside of the demands, penalties, and interest.

Invocation of extended period for raising demands:
The Tribunal considered the protracted correspondence between the appellant and the department regarding duty liability on ethanol. It was noted that the issue was a result of misinterpretation, leading to the conclusion that penalties imposed on the appellant were unwarranted. The Tribunal held that the extended period should not have been invoked due to the circumstances surrounding the discharge of duty by the appellant.

Imposition of penalties and interest:
The Tribunal found that the appellant had paid excess duty on ethanol compared to the demand on molasses. As a result, the impugned order was set aside, and the demands, penalties, and interest confirmed against the appellant were also set aside. The Tribunal emphasized the appellant's bona fide belief based on previous orders and the absence of a challenge by Revenue, leading to the disposal of all appeals in favor of the appellant.