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TMI Blog2024 (6) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... uman consumption; levy of commodity taxation in the constitutional scheme excludes the jurisdiction of the Union on spirits intended for human consumption. Central Excise law is this applicable to all, and any spirit, that is not intended for human consumption. Denaturing is only the mark of that intention as it does not alter the product for further use except in human consumption. Therefore, the intermediate product that emerges, and to the extent that it is not intended for human consumption, is not marketable as such and all the indicators of goods adheres to it upon denaturing. There is no dispute that denatured spirits are manufactured, are excisable and are not exempt. Consequently, the molasses that have been deployed captively for the purpose are exempted from duty. The order of Commissioner of Central Excise is set aside to allow appeal of assessee. - HON BLE MR C J MATHEW , MEMBER ( TECHNICAL ) And HON BLE MR AJAY SHARMA , MEMBER ( JUDICIAL ) Shri H S Shirsat , Consultant for the appellant Shri P K Acharya , Superintendent ( AR ) for the respondent ORDER PER : C J MATHEW The fact of these appeals, pertaining to manufacture undertaken by M/s Karmaveer Kakasaheb Wagh SSK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods on which duty liability was not to be discharged, rendering the molasses , from which both are derived, liable to duty. Thus, liability came to be fastened on the entirety of 29901.560 metric tons supplied through pipeline to the distillery section of the factory during the period in dispute. The allegation that, during this period, the appellant had utilized ₹ 22,05,112 of credit, under CENVAT Credit Rules, 2004, of duty paid on molasses procured by them to discharge duty liability on 10,05,262 litres of denatured ethyl alcohol valued at ₹ 2,03,00,937 while reversing the credit attributable to clearance of rectified spirit which, being, non-excisable, was not eligible for retention was not pursued by the adjudicating authority owing to confirmation of recovery of ₹ 28,61,433 for not having been reversed under rule 6 of CENVAT Credit Rules, 2004. In the other proceedings, for the succeeding period, captive consumption of 1643.25 metric tons of molasses deployed in the manufacturing process on which duty liability of ₹ 12,69,411 held as recoverable by the original authority was set aside in the other order impugned before us. 3. The impugned order of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been fulfilled as the molasses on which duty liability had not been discharged was used in the manufacture and clearance of denatured alcohol on payment of duties of central excise. The assessee is, yet, aggrieved as they are of the view that the outcome will be legal only upon it behind held that rectified spirits is excisable. There is no appeal by Commissioner of Central Excise against the dropping of one element of demand in the first and of dropping of the entire in the second. 4. Indeed, it would appear that, in opposing the appeal for the earlier period, Learned Authorized Representative has adopted a stand contrary to that of Revenue inasmuch as the order of Commissioner of Central Excise (Appeals) that is entirely at variance with that of the Commissioner of Central Excise was not challenged in appeal. Learned Authorized Representative urged us not to infer discrepancy in stands from this curious turn of events as he canvassed non-challenge to be solely on account of the threshold limits in the litigation policy of the Central Government; we are not convinced that this is nothing but an assumption on the part of Learned Authorized Representative because, if that had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude rectified spirits in heading 2204 of Schedule to Central Excise Tariff Act, 1975 is of no relevance as the dispute pertains to the period after. It is not the case of appellant that it was dutiable during the overlap and continued to be thereafter; nor that the condition of being excisable sufficed for coverage under notification no. no. 67/95-CE dated 16th March 1995. The submissions of Learned Consultant have not adverted to the manner in which the appellant was compliant with the terms of the said exemption for Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products (other than those cleared either to a unit in a Free Trade Zone or to a 100% Export Oriented Undertaking or to a unit in an Electronic Hardware Technology Park or to a Software Technology Parks), which are exempt from the whole of duty of excise leviable thereon or are chargeable to Nil rate of duty. makes its inclusionary coverage specific to duty liability at a stage thereafter. The issue in context is the scope for non goods emerging in a manufacturing process to be chargeable to duty, or exempt therefrom, with consequences to def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise. No evidence, in the form of test report of samples drawn at the intermediate stage, either from those cleared into the market or of those deployed for captive consumption , nor of any other basis for concluding that these were indeed marketable to be considered as excisable but not liable to duties of excise is before us. We are unable to fathom the ascertainment by which the adjudicating authorities were able to deduce that some goods were indeed manufactured at intermediate stage by conformity with the test laid down by the Hon ble Supreme Court in Union of India v. Delhi Cloth General Mills [1963 AIR 791] and which prevails over excisability for the latter is secondary to the test of manufacture to bring section 3 of Central Excise Act, 1944 into play. 10. Unarguably, it is the clearance of part of the product at the intermediate stage which underlies the proposition of manufacture and non-excisability that prompted and promoted the adjudicatory exercise. The nature of that clearance has neither been scrutinized for determining the nomenclature of the product by applicable standards as it was governed by an entirely different legal authority that was closed to the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y upon sale of rectified spirit and that is not an element of the dispute here. Such claim for exemption was not preferred in relation to the goods that were yet in the manufacturing process. A notification that was intended as ceasing to be upon claim for exemption on clearance has been contrived to scrutinize a process that the said notification intended to preclude. That is the error in the order of the Commissioner of Central Excise. 13. Spirits are denatured to render unfit for human consumption; levy of commodity taxation in the constitutional scheme excludes the jurisdiction of the Union on spirits intended for human consumption. Central Excise law is this applicable to all, and any spirit, that is not intended for human consumption. Denaturing is only the mark of that intention as it does not alter the product for further use except in human consumption. Therefore, the intermediate product that emerges, and to the extent that it is not intended for human consumption, is not marketable as such and all the indicators of goods adheres to it upon denaturing. There is no dispute that denatured spirits are manufactured, are excisable and are not exempt. Consequently, the molasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to think that pre-denatured ethyl alcohol does not find place in Central Excise Tariff. We find that the show cause notice contends that rectified spirit is manufactured in between the process to manufacture denatured spirit and rectified spirit does not find place in Central Excise Tariff with effect from 1-3-2005 and therefore Cenvat credit is not admissible as inputs input services and capital goods going into manufacture of rectified spirit and hence going into manufacture of denatured spirit. Before 1-3-2005, department accepted that rectified spirit is covered under chapter sub-heading No. 2204.90. As stated above, 2204.90 covers ethyl alcohol except one for human consumption and which are undenatured. Therefore, the issue to be decided is whether ethyl alcohol and rectified spirit are two different commodities or one and the same commodity. We find that the Hon ble Supreme Court in the case of State of Uttar Pradesh v. Modi Distillery and others (supra) in para 9 has observed as follows :- The ISI specifications had divided ethyl alcohol into several kinds of alcohol. Beverages and industrial alcohols were clearly and differently treated. Rectified spirit for industrial proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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