2024 (7) TMI 1163 - AT - Central Excise

Exemption on molasses manufactured and cleared for captive consumption - benefit of N/N. 67/95-CE dated 16-03-1995 - eligibility for credit availed on inputs/input services / capital goods. The department was of the view that the benefit of the Notification No.67/95 is available only when the final products suffer duty and the appellant is not eligible to avail the benefit of notification for the reason that the above mentioned products are non excisable goods, as per Section 2 (d) of the Central Excise Tariff Act 1944. HELD THAT - The very same issue was considered by the Tribunal in the appellant's own case for the earlier period in in Final Order No. 40789-40799/2014 dated 20.11.2014 2014 (11) TMI 919 - CESTAT CHENNAI . It is submitted that rectified spirit and extra neutral alcohol were classified under subheading 220490 prior to 01.03.2005 at nil duty. After restructuring of Tariff with effect from 01.03.2005, rectified spirit, extra neutral alcohol etc. were cleared without payment of duty as exempted goods by Notification No. 03/2005-CE dated 24.02.2005 and Notification No. 12/2012 dated 17.03.2005. The adjudicating authority has denied the benefit of Notification No. 67/2005 on the view that after the restructuring of Tariff, the rectified spirit and extra neutral alcohol were not mentioned in the Tariff. It has been consistently held by Tribunals and High Courts that after restructuring of Tariff, no item has been excluded from the Tariff. The Board Circular No. 808/5/2005-CX dated 25.02.2005 was also relied. It has been clarified by Board that rectified spirit and extra neutral alcohol are covered under subheading 22 07 2000 after restructuring of the Tariff. Thus, it will be covered under Chapter 22. The above decision of the Tribunal has been affirmed and upheld by the Hon ble Apex Court as reported in Commissioner of CE ST versus Dharani Sugars Chemicals Ltd. 2022 (3) TMI 274 - SC ORDER . The demand, interest and penalties cannot sustain. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Eligibility for the benefit of Notification No. 67/95-CE dated 16.03.1995.
2. Eligibility for credit availed on inputs, input services, and capital goods.

Issue-Wise Detailed Analysis:

1. Eligibility for the Benefit of Notification No. 67/95-CE dated 16.03.1995:
The appellant is engaged in the manufacture of various products, including excisable and non-excisable goods. The primary issue is whether the appellant can avail the benefit of Notification No. 67/95-CE for molasses used in the manufacture of non-excisable goods like rectified spirit and extra neutral alcohol. The department argued that these goods are non-excisable as they are not listed in the First Schedule of the Central Excise Tariff Act, 1985, and thus, the appellant is not eligible for the notification benefit.

The appellant contended that rectified spirit and extra neutral alcohol were excisable but exempted goods, classified under subheading 220490 prior to 01.03.2005 at nil duty. After the restructuring of the Tariff effective from 01.03.2005, these goods were cleared without payment of duty as exempted goods by Notification No. 03/2005-CE and Notification No. 12/2012. The Tribunal in the appellant's own case for the earlier period had already set aside the demand, a decision affirmed by the Hon'ble Supreme Court.

The Tribunal reviewed the legislative changes in Chapter 22 and the relevant notifications, concluding that rectified spirit and extra neutral alcohol remained exempted goods under the new tariff structure. The Tribunal cited the Board Circular No. 808/5/2005-CX dated 25.02.2005, which clarified that these goods are covered under subheading 2207 2000 after the tariff restructuring. The Tribunal also referred to various judgments, including the Hon'ble Allahabad High Court's decision in Gularia Chini Mills vs. Union of India, which supported the appellant's position.

2. Eligibility for Credit on Inputs, Input Services, and Capital Goods:
The department also argued that the appellant is not eligible to take credit on molasses procured from outside, other inputs, input services, and capital goods used in the manufacture of non-excisable goods. The appellant had availed credit on various inputs and input services used in the manufacture of non-excisable goods and on capital goods used exclusively in the distillery unit.

The Tribunal noted that the appellant had reversed the amount under Rule 6 of the CENVAT Credit Rules, 2004, at the time of clearance of the exempted denatured ethyl alcohol, including rectified spirit. It was observed that the restructuring of the tariff from 6-digit to 8-digit did not involve any substantive changes in the existing rules, and the appellant's products remained covered under the relevant headings, thus eligible for the exemption and credit.

The Tribunal cited previous decisions, including Ugar Sugar Works vs. CCE and Godavari Sugar Mills Ltd. vs. CCE, which held that rectified spirit and denatured spirit remained excisable under the new tariff structure. The Tribunal concluded that the appellant had discharged the obligation under Rule 6 of the CENVAT Credit Rules by paying 6% of the invoice value on the clearance of rectified spirit, making them eligible for the benefit of Notification No. 67/95-CE.

Conclusion:
The Tribunal, after appreciating the facts and following the above decisions, concluded that the demand, interest, and penalties cannot sustain. The impugned order was set aside, and the appeal was allowed with consequential relief if any. The Tribunal's decision was consistent with its previous rulings and the Hon'ble Supreme Court's affirmation, ensuring the appellant's eligibility for the benefits claimed.