2024 (7) TMI 1310 - AT - Central Excise

CENVAT credit on molasses used for the manufacture of rectified spirit and undenatured alcohol - department was of the view that undenatured ethyl alcohol in the form of rectified spirit, extra neutral alcohol and neutral alcohol etc. which is also manufactured in the distillery are not specified in the First Schedule to the Central Excise Tariff Act, 1985 as excisable goods - exemption of Notification No. 67/1995-CE dated 16.3.1995 on molasses used for captive consumption for manufacture of rectified spirit, undenatured alcohol. HELD THAT - The reason for denying the credit as well as the eligibility of exemption notification No. 67/95 is that the finished products rectified spirit, undenatured alcohol are non-excisable goods and that these cannot be treated as exempted goods as contended by the appellant. This issue stands covered by the judgment of the Hon'ble Supreme Court as reported in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S. DHARANI SUGARS AND CHEMICALS LTD. 2022 (3) TMI 274 - SC ORDER where it was held ' We do not find any merit in the present appeal, as the respondent/assessee has enjoyed the benefit of the exemption Notification No. 67/95-C.E., dated 16-3-1995 till financial year 2005-06. The appellant-Revenue has predicated their case on the addition of the item other in Heading No. 22.04 made vide sub-heading 2204.90 with effect from 1-3-2005. In our opinion the aforesaid addition is not a substantive change or modification.' The Tribunal in the case of M/S. DHARANI SUGARS CHEMICALS LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE, TIRUNELVELI. 2024 (7) TMI 1163 - CESTAT CHENNAI has considered the issue in detail. The view of the department as to whether rectified spirit and undenatured alcohol are not non-excisable has been considered by the Tribunal in detail, where it was held that '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.' There are no ground to take a different view since the issue and facts are identical - the demand cannot sustain - appeal allowed.

Summary

Issues Involved:

1. Disallowance of CENVAT credit on molasses used for the manufacture of rectified spirit and undenatured alcohol.
2. Eligibility for exemption under Notification No. 67/1995 on molasses manufactured and captively consumed for the manufacture of rectified spirit and undenatured alcohol.

Detailed Analysis:

1. Disallowance of CENVAT Credit on Molasses Used for Manufacture of Rectified Spirit and Undenatured Alcohol:

The core issue revolves around whether the appellant is entitled to CENVAT credit on molasses used in the manufacture of rectified spirit and undenatured alcohol, which the department contends are non-excisable goods. The appellant argued that the matter has been settled by the Supreme Court in the case of CCE Vs. Dharani Sugars & Chemicals Ltd., where it was determined that rectified spirit and undenatured alcohol are non-excisable goods. The Tribunal in the Dharani Sugars case, as well as in EID Parry India Ltd., followed this precedent and set aside the department's demand. The Tribunal reiterated that rectified spirit and undenatured alcohol, being non-excisable, do not attract duty, and thus, the credit availed on molasses used in their manufacture cannot be disallowed.

2. Eligibility for Exemption under Notification No. 67/1995:

The second issue is whether the appellant is eligible for the exemption under Notification No. 67/1995 on molasses manufactured and captively consumed for the production of rectified spirit and undenatured alcohol. The department's position was that since these finished products are non-excisable, the exemption cannot apply. However, the Tribunal, referencing the Supreme Court's decision and its own previous judgments, clarified that the restructuring of the tariff from six-digit to eight-digit did not substantively alter the classification or the excisability of these products. The Tribunal noted that the changes were technical and did not intend to withdraw existing benefits. The Tribunal found that rectified spirit and undenatured alcohol, despite being non-excisable, are covered under the exemption Notification No. 67/1995, provided the manufacturer complies with the obligations under Rule 6 of the CENVAT Credit Rules.

Judgment:

The Tribunal concluded that the disallowance of CENVAT credit and the denial of the exemption under Notification No. 67/1995 were not sustainable. The impugned orders were set aside, and the appeals were allowed with consequential relief, affirming the appellant's eligibility for both the CENVAT credit and the exemption. The Tribunal's decision was consistent with the Supreme Court's ruling and its own prior judgments, ensuring that the appellant's practices were in compliance with the established legal framework.