2016 (9) TMI 84 - AT - Central Excise

Duty liability - molasses manufactured locally (indigenously) which are consumed in the manufacturing of rectified sprit which is exempted/non-excisable product - Held that - the appellant has no case as the molasses which are manufactured in the sugar factory are undisputedly consumed for the manufacturing of rectified sprit/alcohol which is non-excisable product. The benefit of Notification No. 67/95 as amended will not be applicable in the case in hand as it requires the final product should be dutiable which in this case is not so; though the part of the rectified sprit is denatured and Central Excise duty is discharged on it. Invokation of extended period of limitation - Held that - from the records available it is found that the appellant had kept Revenue authorities informed about the manufacturing activity of molasses and consumption thereof for the manufacturing of rectified sprit and availment of benefit of Notification No. 67/95 as amended. Therefore, the show-cause notice dated 03.01.2001 invoking extended period for demanding duty on molasses for the period in question is blatantly hit by limitation as there was no suppression or misstatement or collusion alleged in the show-cause notice as also no allegation of intention to evade duty on such molasses. - Decided in fvaour of appellant

Summary

Issues:
1. Duty liability on molasses used in the manufacturing of alcohol products.
2. Allegations of non-payment of duty on indigenous molasses.
3. Application of Notification No. 67/95 as amended.
4. Question of limitation in raising demands for duty payment.

Analysis:

1. Duty liability on molasses used in the manufacturing of alcohol products:
The appellant, a sugar mill engaged in manufacturing denatured ethyl alcohol and rectified spirit, used molasses as a common input for both products. While duty was paid on purchased molasses, no duty was paid on molasses generated in their own factory during the manufacture of sugar. The appellant claimed modvat credit on duty paid molasses and paid Central Excise duty on denatured alcohol. The issue arose regarding the duty liability on molasses used in the production of non-excisable rectified spirit.

2. Allegations of non-payment of duty on indigenous molasses:
Allegations were made against the appellant for consuming indigenous molasses without paying the excise duty leviable on it. The appellant was accused of defying directives to pay duty on molasses and faced penalties for non-compliance. The lower authorities upheld the demands raised, leading to the appeal.

3. Application of Notification No. 67/95 as amended:
The appellant contended that they were entitled to exemption under Notification No. 67/95 as amended, as they had informed the authorities about their manufacturing activities and claimed the benefit of the exemption. The authorities were provided with classification lists, returns, and records indicating compliance with the notification.

4. Question of limitation in raising demands for duty payment:
The appellant argued that the demand raised for the period in question was time-barred as they had regularly filed returns, provided classification lists, and had their records audited by the authorities. The Tribunal found that the show-cause notice invoking extended period for demanding duty on molasses was hit by limitation, as there was no suppression, misstatement, or intention to evade duty alleged.

In conclusion, the Tribunal held that the impugned order was unsustainable on the ground of limitation, setting it aside and allowing the appeal with consequential relief. The judgment emphasized the importance of compliance with duty liabilities, application of relevant notifications, and adherence to statutory limitations in raising demands for duty payment.