2013 (12) TMI 1140 - AT - Central Excise

Denial of Cenvat credit on Molasses - Revenue was of the view that the applicant could not have taken CENVAT credit on such molasses contained in De natured spirit Waiver of pre-deposit Held that - Payment of 10% of the price of exempted product is only one such option - This cannot be thrust on any assessee especially when the assessee meticulously acts to ensure that credit is taken only in respect of inputs that are going into the manufacture of dutiable product - the appellant had maintained separate account regarding receipt, inventory and utilization and took credit on inputs used in dutiable products - the quantity of molasses that will go into dutiable product will be known only at the point of time of de-naturing Relying upon Sakthi Sugars Ltd. Vs Commissioner of Central Excise, Salem 2007 (6) TMI 471 - CESTAT, CHENNAI - the applicant is prima facie correct in taking the credit immediately on knowing the quantity of molasses used in the manufacture of the dutiable product - waiver of pre-deposit of dues gratned till the disposal Stay granted.

Summary

Issues:
1. Whether the appellant can avail CENVAT credit on molasses used in the production of de-natured spirit (DNS) for further manufacturing of dutiable products.
2. Whether the appellant followed the correct procedure for availing CENVAT credit as per the CENVAT Credit Rules, 2004.

Analysis:

Issue 1:
The appellant, a manufacturer of potable alcohol, faced a dispute regarding the eligibility to avail CENVAT credit on molasses used in the production of de-natured spirit (DNS) for further manufacturing of dutiable products. The Revenue contended that since the first output (potable alcohol) was not excisable, the molasses used in DNS production should not qualify for credit. Additionally, the Revenue argued that the appellant was taking credit based on a worksheet rather than on duty paying documents. The show-cause notice led to a duty demand confirmation against the appellant.

Issue 2:
The appellant argued that the Revenue's stance on denying CENVAT credit for molasses exclusively used in non-excisable Extra Neutral Alcohol (ENA) was incorrect. They maintained that the credit was taken only for molasses attributable to industrial alcohol, which was dutiable. The appellant emphasized compliance with Rule 6(1) of the CENVAT Credit Rules, 2004, stating that credit need not be taken immediately upon receipt of goods. The appellant referenced previous decisions favoring their position and highlighted the meticulous record-keeping to ensure credit was claimed only for inputs used in dutiable products.

Judgment:
The Tribunal, comprising Shri Pradip Kumar Das and Shri Mathew John, analyzed the situation under Rule 6 of the CENVAT Credit Rules, 2004. They noted that the appellant had maintained separate accounts and took credit on inputs used in dutiable products, waiting to determine the quantity of molasses for dutiable products at the de-naturing stage. The Tribunal found the appellant's approach reasonable and compliant with the rules. Despite previous decisions supporting the appellant's position, the adjudicating authorities had not followed suit. Consequently, the Tribunal granted a waiver of pre-deposit and stayed the recovery of dues pending the appeal, acknowledging the appellant's correct procedure for availing CENVAT credit.