1997 (9) TMI 303 - AT - Central Excise

Summary

Issues:
Eligibility of denatured Ethyl Alcohol for money credit scheme under Notification No. 231/87-C.E. and the deduction of denaturants from the quantity of denatured ethyl alcohol for extending the benefit.

Analysis:
The appeal pertains to M/s. Somaiya Organics (I) Ltd. regarding the eligibility of denatured Ethyl Alcohol for the money credit scheme under Notification No. 231/87-C.E., issued under Rule 57K of the Central Excise Rules, 1944. The dispute arose when the Superintendent of Central Excise issued a show cause notice proposing to disallow credit on 0.2% of the denatured ethyl alcohol quantity, contending that this portion represented denaturants ineligible for the benefit of the notification. The key contention was whether denatured ethyl alcohol, including the denaturants, was eligible for the scheme.

The Tribunal considered the arguments presented by both sides. The notification allowed ethyl alcohol, denatured or not, for the credit scheme when used in manufacturing specified final products. The denatured ethyl alcohol falls under Heading No. 22.04 of excisable goods. The Appellant argued that the denaturants should not be deducted from the quantity for availing benefits, citing a trade notice supporting their position. Additionally, definitions of denaturation, denatured alcohol, and specially denatured alcohol were referenced to highlight the purpose and suitability of denaturing ethyl alcohol for various industries.

The Tribunal acknowledged that denaturation is an irreversible process to render ethyl alcohol unfit for beverage use, tailored to the specific finished product requirements. It was deemed inappropriate to deduct denaturants from denatured ethyl alcohol to determine eligibility for the notification's benefits. The Tribunal distinguished a previous decision involving the same Appellant, emphasizing the specific issue addressed in that case regarding different final products.

Ultimately, the Tribunal ruled in favor of the Appellant, rejecting the demand for Central Excise duty on denaturants in denatured ethyl alcohol. The Appellant's argument regarding the limitation period for the demand was not addressed as the Tribunal found merit in the Appellant's case on the substantive issue, rendering the limitation question unnecessary for consideration. Considering all relevant factors, the appeal was allowed in favor of the Appellant, upholding their eligibility for the money credit scheme under the notification.