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2023 (7) TMI 1117 - AT - Central ExciseCENVAT Credit - rectified spirit arising in the course of manufacture of sugar - excisable goods or not - recovery of input credit alongwith interest and penalty - Extended period of time limitation - levy of penalty - HELD THAT - The very same issue was considered in the cases of RAJSHREE SUGARS AND CHEMICALS LTD. AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY AND OTHERS 2014 (11) TMI 919 - CESTAT CHENNAI , COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S. DHARANI SUGARS AND CHEMICALS LTD. 2022 (3) TMI 274 - SC ORDER . The Tribunal in RAJSHREE SUGARS AND CHEMICALS LTD. AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY AND OTHERS 2014 (11) TMI 919 - CESTAT CHENNAI held that the denial of Exemption Notification No.67/95-CE on molasses captively consumed to manufacture Rectified Spirit and Extra Neutral Alcohol (ENA) cannot be justified. Accordingly, denial of credit on molasses was also set aside. Thus, the impugned order cannot sustain and requires to be set aside - appeal allowed.
Issues Involved:
1. Whether rectified spirit arising in the course of manufacture of sugar can be considered as excisable goods. 2. Whether input credit on molasses used in the manufacture of rectified spirit can be availed under Cenvat credit rules. 3. Whether invoking the extended period of time limit is in order and consequently whether the imposition of penalty is justified. Summary: Issue 1: Excisability of Rectified Spirit The appellant argued that rectified spirit, not being fit for human consumption, should fall under Chapter 22 of the Central Excise Tariff Act, 1985, and thus be considered excisable. They relied on various case laws and interpretative rules to assert that rectified spirit, having 95% alcoholic strength, is not fit for human consumption and should be classified under Heading 2207. The Tribunal had previously held that rectified spirit and denatured spirit are covered under the same heading 2207 20 00. The department contended that rectified spirit is not excisable since it is capable of being made fit for human consumption and thus excluded from Chapter 22. The Tribunal, referencing its earlier decisions, confirmed that rectified spirit is excisable but exempt under a notification. Issue 2: Availment of Input Credit on Molasses The appellant claimed eligibility for input credit on molasses used in the production of rectified spirit, arguing compliance with Rule 6 of the Cenvat Credit Rules, 2004. The Tribunal had previously set aside the denial of credit on molasses used in the manufacture of rectified spirit and ENA, as rectified spirit was considered exempted goods under Notification No. 3/2005-CE. The department argued that the credit was wrongly availed since rectified spirit is not excisable. The Tribunal, following its earlier rulings, held that the appellant had discharged their obligations under Rule 6 and thus the denial of credit could not be sustained. Issue 3: Invoking Extended Period and Imposition of Penalty The appellant contended that the extended period could not be invoked as the department was aware of the facts, and similar notices had been served for earlier periods. The Tribunal noted that invoking the extended period was not justified since the facts were known to the department much earlier. The Tribunal also referenced its earlier decisions where it was held that once the credit attributable to molasses used in the manufacture of rectified spirit is reversed, no further liability would arise. Conclusion: The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, holding that rectified spirit is excisable but exempt under a notification, and the appellant is eligible for input credit on molasses used in its production. The extended period for demand and imposition of penalty was also found to be unjustified.
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