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TMI Blog2012 (11) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. After hearing both sides, we find that the appellants are engaged in the manufacture of Ethyl alcohol and other spirits, along with denatured spirit falling under Chapter 22 of the first scheduled to the Central Excise Tariff Act, 1985. They were holding valid Central Excise registration for the purpose of manufacture of such spirit as also denatured spirit. The appellants availed the benefit of Cenvat credit of duty paid on the inputs as well as on the capital goods in terms of the Cenvat Credit Rules, 2004. 3. As an audit objection, the Revenue entertained a view that inasmuch as the appellants are primarily and mainly engaged in manufacture of spirit, which is a non-excisable item and on which no excise duty is being paid by them, the Cenvat credit availed in respect of capital goods so utilised was not available. The appellants manufacture spirit in their factory and 98% of the same is sold in the open market. Balance of 2% of the spirit is converted into denatured spirit. Denatured spirit is an excisable product and the appellants are clearing the same on payment of Central Excise duty. Inasmuch as the process of manufacture of denatured spirit from spirit is a simple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come unsuitable for human consumption and denaturants can not be dissolved to retain the original form of Rectified Spirit/Impure Spirit. No Plant and Machinery is required for the manufacture of Denature Spirit from the Rectified Spirit/Impure Spirit. (ii) Mainly, in the Distillery Units, Spirit is manufactured from the Molasses and Food Grains. During the course of manufacturing Spirit, Impure spirit also arises which is further used in the manufacture of Denatured Spirit as explained above. Further as explained in (i) above, the denaturants are added into the Rectified Spirit/Impure Spirit for the manufacture of Denatured Spirit. Though the Plant and Machinery is required for the manufacture of Rectified Spirit/Impure Spirit but for the manufacture of Denatured Spirit beyond the process of Rectified Spirit/Impure Spirit, no plant and machinery is required. It can be manufactured by the same simple process as explained above. 9. From the above, the Revenue entertained a view that inasmuch as the process of conversion of spirit into denatured spirit is a simple process of mixing, the plant and machinery cannot be held to have been used in the manufacture of final excisable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of excisable goods can only avail the credit in respect of capital goods and no credit is available when the capital goods are exclusively used in relation to manufacture of exempted final product. He also supports the reasoning of the adjudicating authority as regards the demand being barred by limitation. 12. For better appreciation of the reasoning adopted by the Commissioner on the main issue, we reproduce paras 4.9 and 4.10 of Commissioner s order as under : 4.9 In this regard it is observed that denatured spirit is manufactured from impure spirit by adding some denaturant to the same. However, the fact that the actual product manufactured by them is ethyl alcohol, a non excisable item, which is not in dispute. There is also no dispute about the fact that production of impure spirit is only about 2% of the total production. This impure spirit is nothing but a kind of waste as the same cannot be used for the manufacture of alcoholic liquor meant for human consumption, which is the main product of the Noticee. I am not inclined to accept the contention of the noticee that the same machinery is used for the manufacture of denatured spirit inasmuch as no person of pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphatic no. 14. Taking an example of everyday life, for preparation of a dosa, rice and lentils are required, which have to be soaked in water overnight, have to be grinded in mixer-grinder and again have to be kept for some time. The batter which emerges is to be used for preparation of dosa. Admittedly, the process of manufacture of batter requires mixer grinder and then emerges the batter, and the process of preparation of dosa does not require the use of mixer-grinder as it is a simple process of spreading the batter on the iron plate and roast the same. Can it be said that mixer-grinder was not used in the manufacture of dosa but the same was used in the manufacture of batter. The process cannot be artificially split so as to hold that the batter was non-excisable final product and inasmuch the subsequent process of making dosa was a simplicitor process of spreading the batter on the iron plate and roasting the same. It may be mentioned here that in a given case, 98% of the batter may be sold or disposed without payment of duty and only 2% of the same may be converted into dosas. Even then it is to be held that grinder has been used for the manufacture/preparation of dosa. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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