2024 (8) TMI 992 - AT - Central Excise

Refund of excise duty paid - by-product molasses - captive consumption(being exempted under N/N. 67/95CE dated 16.3.1995, as amended) for the manufacture of exempted final products - Rectified Spirit and Extra Neutral Alcohol - HELD THAT - Undisputed facts are that the appellants are manufacturing sugar and in the process of manufacturing of sugar, molasses emerge as a by-product which in turn used in the manufacture of dutiable products viz., Fuse Oil, Denatured Spirit, Ethyl Alcohol and Carbon dioxide; and also exempted products viz., Rectified Spirit and Extra Neutral Alcohol. The appellant had initially discharged duty on the said molasses for the period September 2007 to April 2008. Later, they filed a refund claim of the duty paid pleading that molasses consumed captively, eligible for exemption under Notification No.67/95-CE dated 16.3.1995, since they have complied with the Condition (vi) of the N/N. 67/1995-CE dated 16.3.1995. Therefore, molasses even if used in the manufacture of exempted products viz., Rectified Spirit and Extra Neutral Alcohol still eligible to avail exemption. In the present case, the appellant had reversed proportionate credit attributable to manufacture of molasses which cannot make them eligible to claim exemption N/N. 67/95-CE on molasses used in the manufacture of exempted goods, which is the second stage of manufacture of Ethyl Alcohol and denatured spirit. Thus, the credit attributable to the inputs i.e., molasses used in the manufacture of exempted goods is to be statutorily reversed. This Tribunal analysing the relevant provisions of Rule 6 of CCR, 2004 has taken a view that credit on inputs availed and used in the manufacture of molasses, an input and intermediate by-product, which in turn is used in the manufacture of exempted final products viz., Ethyl Alcohol and denatured spirit, therefore, inputs attributable to the manufacture of molasses, on its reversal, is a sufficient compliance of Rule 6 of CCR, 2004; hence, eligible to the benefit of N/N. 67/95-CE dated 1.3.1995. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Eligibility for refund of excise duty paid on molasses used captively for manufacturing exempted products.
2. Compliance with Notification No. 67/1995-CE and Rule 6 of the CENVAT Credit Rules, 2004.
3. Interpretation of Rule 6(3)(a)(i) of the CENVAT Credit Rules, 2004.

Detailed Analysis:

1. Eligibility for Refund of Excise Duty Paid on Molasses Used Captively for Manufacturing Exempted Products:
The appellants are engaged in the manufacture of sugar and its by-product, molasses, which is further used in their distillery unit to produce Rectified Spirit and Extra Neutral Alcohol. They initially paid duty on molasses but later claimed exemption under Notification No. 67/1995-CE, arguing that molasses used captively in the manufacture of exempted products should be eligible for exemption. The refund claim for the duty paid from September 2007 to April 2008 was rejected by the Assistant Commissioner and subsequently by the Commissioner (Appeals), leading to the present appeal.

2. Compliance with Notification No. 67/1995-CE and Rule 6 of the CENVAT Credit Rules, 2004:
The core argument revolves around whether the appellants complied with the conditions stipulated in Notification No. 67/1995-CE, particularly Clause (vi), which mandates compliance with Rule 6 of the CENVAT Credit Rules, 2004. The appellants contended that they reversed the CENVAT credit attributable to the inputs and input services used in the manufacture of molasses, thus fulfilling the conditions for availing the exemption. They cited several judgments, including Godavari Sugar Mills Ltd. and Sri Chamundeswari Sugars Ltd., to support their claim that the issue is no longer res integra.

3. Interpretation of Rule 6(3)(a)(i) of the CENVAT Credit Rules, 2004:
The appellants argued that Rule 6(3)(a)(i) allows for the reversal of CENVAT credit attributable to inputs and input services used in the manufacture of exempted final products. They maintained that molasses, an inevitable by-product in sugar manufacture, is used to produce both dutiable and exempted products. The Revenue, however, contended that the appellants failed to comply with Rule 6 by not reversing the duty payable on molasses used in the manufacture of exempted products. The Tribunal, referencing prior judgments, concluded that the appellants' reversal of proportionate credit attributable to the manufacture of molasses was sufficient compliance under Rule 6, thereby entitling them to the exemption under Notification No. 67/1995-CE.

Conclusion:
The Tribunal found that the appellants had complied with the conditions of Notification No. 67/1995-CE by reversing the CENVAT credit attributable to the inputs used in the manufacture of molasses. This compliance with Rule 6 of the CENVAT Credit Rules, 2004, was deemed sufficient for availing the exemption. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief as per law.

(Order pronounced in Open Court on 20.08.2024.)