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TMI Blog2016 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 15,00,000/- 3. E/89187/2013 15/CEX/2013, dated 12th July, 2013. Rs. 2,40,52,041/- Rs. 24,00,000/- 4. E/89092/2013 Shree Satpuda Tapi Parisar Sahakar Sakhar Karkhana Ltd. 16/CEX/2013, dated 15th July, 2013. Rs. 12,18,10,431/- Rs. 12,18,10,431/- 5. E/85361/2015 08 & 09/CEX/2014, dated 31st December, 2014. Rs. 2,95,38,716/- Rs. 60 lakhs 6. E/85362/2015 Rs. 3,10,57,659/- 7. E/86504/2013 Niphad Sahakari Sakhar Karkhana Ltd. 01/CEX/2013, dated 10th January, 2013. Rs. 6,03,67,770/- Rs. 6,03,67,770/- 8. E/89136/2013 14/CEX/2013, dated 12th July, 2013. Rs. 7,60,077/- Rs. 75,000/- 9. E/89510/2013 Madhukar Sahakari Sakhar Karkhana Ltd. 25/CEX/2013, dated 10th September, 2013. Rs. 96,07,807/- Rs. 9,00,000/- 10. E/87182/2013 09/CEX/2013, dated 27th February, 2013. Rs. 1,22,96,926/- Rs. 10,00,000/- 11. E/89195/2013 Sahakarmaharshi Bhausaheb Thorat Sahakari Sakhar Karkhana Ltd. 13/CEX/2013, dated 12th July, 2013. Rs. 1,83,14,719/- Rs. 18,00,000/- 12. E/86799/2013 07/CEX/2013, dated 24th January, 2013. Rs. 8,29,92,493/- Rs. 8,29,92,493/- 2. The appellants are distilleries that source molasses, the primary input, from various sugar factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as placed at 2207 as 'ethyl alcohol and other spirits, denatured, of any strength and to restrict further classification to - Ethyl alcohol and other spirits, denatured, of any strength (220720 00) Notification No. 3/2005-C.E., dated 24th February, 2005 extended exemption from excise duty to all spirits other than denatured ethyl alcohol of any strength. 5. The issue in dispute relates to utilization of credit taken on the input under Cenvat Credit Rules, 2004 and the non-compliance with the conditions governing the Rules when exempted goods are manufactured using duty paid inputs on which credit has been taken. Rectified spirit cleared, as such, was considered as exempt goods and denatured spirit as excisable goods. The appellants resorted to reversal of credit in accordance with Rule 6(3)(a) of Cenvat Credit Rules, 2004 till 31st March, 2008. Thereafter, the option of paying an amount equal to specified percentage of value of exempted goods or paying such amount as determined by formula in Rule 6(3A) of Cenvat Credit Rules, 2004 was being followed. 6. Rule 6(1) of Cenvat Credit Rules, 2004 forbids recourse to credit of duty paid on inputs used in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Alternatively, it was also submitted that the credit taken should have been allowed in accordance with restrictions in Rule 6 of Cenvat Credit Rules, 2004. The imposition of penalty was also challenged as no evidence of mens rea had been adduced in the impugned order. It was also contended that the changes in the Tariff with effect from 28th February, 2005 was not intended to bring about any substantive changes in taxation and that the proceedings initiated were, therefore, incorrect. Reliance was placed on the decision of the Tribunal in Re : VAM Organic Chemicals [1989 (39) E.L.T. 72 (T)], to contend that Modvat credit could not be denied or varied even if non-dutiable intermediate goods emerge. It was also submitted that ethyl alcohol is not the sole product that emerges from the manufacturing process as carbon dioxide is a by-product besides clearing of denatured spirit which is a dutiable item. 9. Learned Authorized Representative took us through the provisions of the Constitution of India demarcating taxation powers between Union and States and thereby rendering ethyl alcohol to be a non-excisable item; being non-excisable, the procurement of molasses would not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly, an exempted goods does emerge from the distillation. Most of these may have been cleared under the excise laws of the State; to the extent that they have been, it is akin to clearance of goods on which exemption notification has been claimed. 11. Denaturing of ethyl alcohol is an extension of the process of manufacturing a dutiable product commencing with molasses. Therefore, there can be no doubt that the appellants manufacture both exempted and dutiable goods using duty-paid molasses. It would appear that the appellants have been following the procedure laid down in Rule 6 of Cenvat Credit Rules, 2004 and reversing credit taken on inputs at the time of clearance of rectified spirit. 12. The Tribunal has consistently been taking the stand that in case of molasses used for manufacture of rectified spirit and denatured alcohol by distilleries, compliance with Rule 6 of Cenvat Credit Rules, 2004 is sufficient. In Vishwanath Sugars Ltd. v. Commissioner of C. Ex., Belgaum [2010 (250) E.L.T. 390 (Tri.-Bang.)], the Tribunal held that clearance of dutiable denatured spirit even for a part of the year was sufficient for allowing proportionate credit of duty paid on in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption would not be applicable. 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. 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. Where the final product is ethyl alcohol and other spirits denature of any strength, it is sufficient if the Cenvat credit attributable to inputs in the exempted product is reversed or paid. Therefore, the appellants are entitled to the benefit of Notification No. 67/95 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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