2017 (10) TMI 1036 - AT - Central Excise

Whether Ethyl Alcohol and rectified spirit are two different commodities or one and the same commodity? Held that - the Hon ble Supreme Court in the case of State of Uttar Pradesh Vs Modi Distillery and others 1995 (8) TMI 300 - SUPREME COURT has held that Ethyl Alcohol and rectified spirit are one and the same - rectified spirit which is not used for human consumption is nothing but Ethyl Alcohol and is finding place in Tariff Item No.22072000 - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Availability of CENVAT credit on inputs and capital goods for manufacturing denatured spirit.
- Liability to pay duty on Molasses captively consumed.
- Interpretation of Central Excise Tariff regarding rectified spirit and Ethyl Alcohol.
- Admissibility of CENVAT credit chain in a continuous manufacturing process.
- Comparison between Ethyl Alcohol and rectified spirit as commodities.

Issue 1: Availability of CENVAT credit on inputs and capital goods for manufacturing denatured spirit.

The appellant, a composite mill with Sugar and Distillery Divisions, faced a show cause notice challenging the availment of CENVAT credit and proposing duty on Molasses consumed. The Revenue argued that the CENVAT credit chain was broken due to the emergence of a product not listed in the Central Excise Tariff. The original authority upheld the demand and penalty, leading to the appeal. The appellant contended that rectified spirit was essentially Ethyl Alcohol, thus entitled to CENVAT credit. The Tribunal analyzed the manufacturing process, concluding that rectified spirit was indeed Ethyl Alcohol, finding a place in Tariff Item No.22072000. Consequently, the show cause notice was deemed unsustainable, and the appeal was allowed.

Issue 2: Liability to pay duty on Molasses captively consumed.

The dispute revolved around the duty liability on Molasses used in the manufacturing process. The Revenue claimed duty payment was necessary for Molasses consumed internally. However, the appellant argued that rectified spirit, derived from Molasses, was Ethyl Alcohol, falling under Tariff Item No.22072000. The Tribunal concurred that rectified spirit was Ethyl Alcohol, thus dismissing the duty demand on Molasses consumed internally.

Issue 3: Interpretation of Central Excise Tariff regarding rectified spirit and Ethyl Alcohol.

The central question was whether rectified spirit and Ethyl Alcohol were distinct commodities or synonymous. The Tribunal referred to a Supreme Court ruling, establishing that rectified spirit was a form of Ethyl Alcohol. This interpretation led to the conclusion that rectified spirit was covered under Tariff Item No.22072000, aligning with Ethyl Alcohol classification.

Issue 4: Admissibility of CENVAT credit chain in a continuous manufacturing process.

The case highlighted the challenge of maintaining CENVAT credit continuity in a continuous manufacturing process. The appellant argued that the emergence of a non-excisable product did not render CENVAT credit inadmissible. The Tribunal examined the manufacturing flow, confirming that rectified spirit was Ethyl Alcohol, ensuring the admissibility of CENVAT credit throughout the process.

Issue 5: Comparison between Ethyl Alcohol and rectified spirit as commodities.

The distinction between Ethyl Alcohol and rectified spirit was crucial in determining the applicability of CENVAT credit and duty liabilities. By referencing a Supreme Court observation equating rectified spirit to Ethyl Alcohol, the Tribunal established that both terms referred to the same commodity. This finding supported the appellant's argument for CENVAT credit availability and dismissal of duty demands on Molasses consumed internally.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT ALLAHABAD addressed various issues concerning CENVAT credit, duty liabilities, Tariff interpretation, and product classification, ultimately favoring the appellant's contentions and allowing the appeal.