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TMI Blog2006 (11) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... r Mills manufacture sugar and molasses. They are availing Cenvat credit on capital goods and inputs used in relation to the manufacture of the above products. They also have a Distillery within the premises of the sugar factory. The molasses manufactured in the sugar unit is cleared to the Distillery on payment of duty. The molasses is used for manufacturing Rectified Spirit and Denatured Spirit and ethanol. Rectified Spirit is an exempted product. Therefore, the appellant pays an amount equal to the Cenvat credit attributable to molasses utilized for the manufacture of the Rectified Spirit so cleared. Denatured Spirit and Ethanol being dutiable products, the appellant pays duty on clearance by utilizing the credit availed on the Molasses. The department held the view that the appellant is not entitled for Cenvat credit for duty paid on the quantity of molasses manufactured within the factory and cleared to their own Distillery. Revenue relied on Board's Circular No. 615/6/2002-CX dated 4-2-2002. A Show Cause Notice was issued. The Adjudicating Authority passed the impugned order No. 21/2005 dated 8-8-2005. In the impugned order, the irregular credit on a quantity of 26,221.22 MTs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndrapur Magnet Wires (P) Ltd. v. CCE, Nagpur [1996 (81) E.L.T. 3 (S.C.) = 1996 (2) SCC 159.] (b) Final Order No. 852/2004 in the case of M/s. Ugar Sugar Works v. CCE, Belgaum (Tri.-Bang.) (c) CCE, Lucknow v. Kesar Enterprises Ltd. - 2001 (130) E.L.T. 93 (Tri.-Del.) 3. In respect of M/s. Renuka Sugars Ltd., Revenue felt that the appellant availed exemption in terms of Notification No. 67/95-Central Excise dated 15-3-1995 for the molasses captively used and such availment is not in order. In the appellant's unit, the molasses cleared for captive use was used in the manufacture of ethyl alcohol (pure Rectified Spirit), which is not dutiable. A part of the Rectified Spirit was converted to Denatured Spirit after adding denaturing elements. Denatured Spirit is cleared on payment of duty. Show Cause Notice was issued and the Adjudicating Authority in the impugned order demanded duty amounting to Rs. 2,70,85,335/- on molasses cleared for captive use without payment of duty from September 2004 to July 2005 under Section 11A of the Central Excise Act, 1944. Further, a credit of Rs 38,93,515/- was disallowed for the period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n molasses of Rs. 3,46,50,110/-. (v) Thus the demand is not sustainable in view of revenue neutrality and imposition of equivalent penalty is unjust and arbitrary. For the same reason, there is no question of recovery of any interest under Section 11AB. The following cases have been relied on. (a) Jaypee Rewa Cement v. CCE - 2001 (133) E.L.T. 3 (S.C.) (b) Shree Ramakrishna Steel Industries Ltd. v. CCE - 1996 (82) E.L.T. 575 (Tri.-LB). (c) Vam Organics v. CCE - 1989 (39) E.L.T. 72 (affirmed by the Supreme Court, 1996 (84) E.L.T. A169 (S.C.). (d) CCE v. Flex Lamination - 1998 (102) E.L.T. 574/2000 (124) E.L.T. 558 (Tri.) (e) Polychem Ltd. v. CCE - 1993 (68) E.L.T. 687 (T). (f) SAIL v. CCE - 2001 (132) E.L.T. 401 (T) (g) Arya Filaments v. CCE - 2005 (180) E.L.T. 140 (T) (h) Oriental Carbon & Chemicals Ltd. v. CCE - 1998 (102) E.L.T. 321. (i) Gharda Chemicals v. CCE - 1999 (105) E.L.T. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95. (iii) Reliance is placed on the decision of the Tribunal in the case of M/s. Sri Sarvaraya Sugars Ltd. v. CCE & C - Final Order No. 1749/2006 dated 12-10-2006. (iv) The Adjudicating Authority has dealt with the utilization of Cenvat credit on capital goods, inputs and input services for payment of excise duty on sugar and other excisable products. He has held in the impugned order that on the date of passing of the order, the ethanol plant has been used only for production of exempted products (Rectified Spirit) and therefore, credit is not available and the same would be made available to the appellant on commencement of production of ethanol. The above finding is incorrect because in Para 7 of the Show Cause Notice, it is stated that the appellants are producing both Rectified Sprit (which is not excisable) and Denatured Spirit (which is dutiable), therefore the above finding of the Commissioner is not maintainable. Reliance is placed on the following decisions. (a) Excel Industries Ltd. v. CCE - 2005 (187) E.L.T. 216. (b) CCE v. Sudarsanam Spinners Ltd. - 2004 (167) E.L.T. 210. 6. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit, which is dutiable. Our attention was invited to amendment to Notification No. 67/95-C.E. by Notification No. 31/2001-C.E. dated 1-1-2001. In terms of the said amendment, the appellants are entitled for the benefit of exemption Notification in a situation where there is manufacture of both dutiable and exempted final products, provided the manufacturer discharges the obligation prescribed in Rule 57AD of the Central Excise Rules, 1944, which is pari materia with Rule 6 of the Cenvat Credit Rules, 2002. This is the point urged by the appellants. What is the obligation under Rule 6 of the Cenvat Credit Rules, 2002? The obligation under Rule 6 of Cenvat Credit Rules is that when a manufacturer uses input both for exempted and dutiable final products, he should maintain separate accounts because no Cenvat credit is available for the inputs used in exempted products. There is an option for the manufacturer not to maintain two separate accounts. Once he exercises the option, it is sufficient if he pays 10% of the sale price of the exempted product ..... X X X X Extracts X X X X X X X X Extracts X X X X
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