2015 (3) TMI 954 - AT - Central Excise

Waiver of pre deposit - Captive consumption - Denial of exemption under Notification No. 67/95-CE. - CENVAT Credit - Department s case against the appellant is that firstly while certain Cenvat credit availed input services have been used in or in relation to manufacture of their final products out of which while sugar and molasses are dutiable, and bagasse press mud/bio-compost and electricity are exempted final product - second objection of the Department is that while the appellant have cleared the in-house production of molasses for captive use to the distillery unit by availing duty exemption under Notification No. 67/95-CE, this exemption would not be admissible to the extent molasses has been used in the manufacture of non-excisable goods, namely extra neutral alcohol (ENA), which during the period of dispute was not figuring in the Central Excise Tariff and as such was non-excisabl - Held that - duty exemption in respect of molasses manufactured in the appellant s factory and captively cleared to the distillery unit would not be admissible, to the extent the molasses was used in the manufactured of un-denatured ethyl alcohol. Duty demand of ₹ 6,35,38,125/- in respect of the clearances of molasses for captive use to the distillery unit appears to be on a strong footing. Since the un-denatured ethyl alcohol/extra neutral ethyl alcohol are non-excisable items, the molasses used for manufacture of these products would not be eligible for Cenvat credit and according to the Department Cenvat credit of ₹ 5,34,03,535/- has been availed in respect of molasses used for manufacture of non-excisable goods. Though the appellant plead that they had been reversing the Cenvat credit in respect of the quantity of molasses used for the manufacture of un-denatured ethyl alcohol/extra neutral ethyl alcohol by treating the same has exempted final product, this claim has to be examined in detail which can be done only at the stage of final hearing. - this is not the case for total waiver from the requirement of pre-deposit. - Partial stay granted.

Summary

Issues Involved:
1. Whether the appellant's products such as bagasse, press mud, bio-compost, and electricity are exempted excisable goods.
2. Whether the exemption under Notification No. 67/95-CE is admissible for molasses used in the manufacture of non-excisable goods like extra neutral alcohol (ENA).
3. Whether the Cenvat credit availed on molasses used for manufacturing non-excisable goods is admissible.
4. Compliance with Rule 6 (3) (ii) of the Cenvat Credit Rules, 2004 regarding reversal of Cenvat credit for exempted goods.

Issue-wise Detailed Analysis:

1. Exemption Status of Bagasse, Press Mud, Bio-compost, and Electricity:
The Department contends that bagasse, press mud, bio-compost, and electricity are exempted excisable goods, and the appellant did not reverse the proportionate Cenvat credit for inputs used in their manufacture. The appellant argues compliance with Rule 6 (3) (ii) read with Rule 6 (3A) of the Cenvat Credit Rules, 2004. The Tribunal noted that this compliance is a factual matter to be examined during the final hearing.

2. Admissibility of Exemption under Notification No. 67/95-CE for Molasses:
The Department's position is that the exemption under Notification No. 67/95-CE is not admissible for molasses used to manufacture non-excisable goods like ENA. The appellant argues that rectified spirit/ENA are excisable goods with nil duty, and they have reversed the proportionate credit. The Tribunal found merit in the Department's contention, noting that during the period of dispute, un-denatured ethyl alcohol was not covered under the Central Excise Tariff, making it non-excisable. Consequently, the exemption under Notification No. 67/95-CE would not apply to molasses used for producing non-excisable goods.

3. Cenvat Credit on Molasses for Non-excisable Goods:
The Department asserts that Cenvat credit on molasses used for manufacturing non-excisable goods like ENA is inadmissible. The appellant claims they reversed the proportionate credit for molasses used in ENA production. The Tribunal observed that detailed examination of this claim is necessary, which will be done at the final hearing.

4. Compliance with Rule 6 (3) (ii) of the Cenvat Credit Rules, 2004:
The Department demanded Rs. 48,48,388/- for non-compliance with Rule 6 (3) (ii) regarding bagasse, press mud, bio-compost, and electricity. The appellant contends compliance with Rule 6 (3A) of the Cenvat Credit Rules, 2004. The Tribunal noted that this compliance needs factual verification during the final hearing.

Interim Order:
The Tribunal directed the appellant to deposit Rs. 5,00,00,000/- within eight weeks, in addition to the already reversed Cenvat credit of Rs. 75,06,573/-. Upon compliance, the requirement of pre-deposit of the remaining duty/Cenvat credit demand, interest, and penalty would be waived, and recovery stayed until the final decision.

Conclusion:
The Tribunal's interim order requires a substantial pre-deposit from the appellant, indicating a prima facie case favoring the Department's stance on the non-excisability of ENA and the inadmissibility of related Cenvat credits and exemptions. The final resolution will depend on detailed factual examinations during the final hearing.