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TMI Blog2024 (7) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 onwards. They manufactured denatured Ethyl Alcohol from July 2012 onwards. The Denatured Ethyl Alcohol manufactured in their distillery plant which is classifiable under Chapter Sub-Heading 22072000 is removed by the appellant on payment of duty. The department was of the view that undenatured ethyl alcohol in the form of rectified spirit, extra neutral alcohol and neutral alcohol etc. which is also manufactured in the distillery are not specified in the First Schedule to the Central Excise Tariff Act, 1985 as 'excisable' goods. The appellant had availed CENVAT credit on molasses purchased from outside and used in the manufacture of sugar. According to department the appellant is not eligible to avail credit of the duty of molasses as well as not eligible for exemption of Notification No. 67/1995-CE dated 16.3.1995 on molasses used for captive consumption. As per the said notification, only if the goods are 'excisable', the benefit of exemption would be eligible. Show Cause Notice dated 16.4.2014 and 25.7.2014 were issued to the appellant proposing to disallow the credit availed on molasses used for manufacture of rectified spirit and other undenatured spirit and also to demand d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 556 (SC). The relevant paragraph reads as under:- "1. We do not find any merit in the present appeal, as the respondent/assessee has enjoyed the benefit of the exemption Notification No. 67/95-C.E., dated 16-3-1995 till financial year 2005-06. The appellant-Revenue has predicated their case on the addition of the item "other" in Heading No. 22.04 made vide sub-heading 2204.90 with effect from 1-3-2005. In our opinion the aforesaid addition is not a substantive change or modification. In fact, the Tribunal has pointed out and it is accepted that the changes were made pursuant to adoption and re-structuring of tariff from six digit to eight digit. The changes made were not with the intend to withdraw the existing benefits or to withdraw an exemption which had been given and had been enjoyed by the respondent/assessee for the last twenty years. 2. Recording the aforesaid, the appeal stands dismissed. C.A. Nos. 14628/2015, 13469/2015 & 9088/2018 3. In view of order passed in C.A. No. 8915/2015, these appeals stand dismissed." 7. The Tribunal in the case of Dharani Sugars & Chemicals Ltd. vide Final Order dated 27.5.2024 has considered the issue in detail. The view of the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (1) (2) (3) 22.04 2204.00 Ethyl Alcohol of any strength whether denatured or not, but not including alcoholic liquor for human consumption Rectified Spirit and ENA are not fit for human consumption and covered by exemption Notification No. 2/94-CE dated 1.3.1994 (Sl. No. 32 of the Table) exempted all goods, other than Ethyl Alcohol of any strength, denatured under sub-heading 2204.00 nil rate of duty. (II) Prior to 1.3.2005, Note 1 of Chapter 22 provides that "this Chapter does not cover alcoholic liquors for human consumption". The relevant portion of Heading No. 22.04 is reproduced below : - Heading No. Sub-heading Description of goods (1) (2) (3) 22.04 2204.10 2204.90 Ethyl Alcohol of any strength whether denatured or not, but not including alcoholic liquor for human consumption -Denatured ethyl alcohol of any strength - Other NIL Rectified Spirit and ENA covered under Sub-heading No. 2204.90, NIL duty. (III) After re-structuring of Tariff from 6 digit to 8 digit, with effect from 1.3.2005, Note 4 of Chapter 22 states that "this Chapter does not cover alcoholic liquor for human consumption". Heading No. 2204 is shown as blank. Heading 2207 covers "et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , other than those goods which are cleared - (i) xxxx xxxxx xxxxx xxxxx (ii) xxxx xxxxx xxxxx xxxxx (vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules, 2001. Explanation ************ TABLE Description of Inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act 1985 (5 of 1986) other than (light diesel oil, high speed diesel oil) and motor spirit, commonly known as petrol. All goods falling under the First Schedule to the Central Excise Tariff Act 1985 ( 5 of 1986), other than matches. 8.3 We find that the present dispute is emerged due to restructuring of the Tariff from 6 digit to 8 digit. CBEC vide Circular No. 808/5/2005-CX dated 25.2.2005 regarding implementation of Tariff from 6 Digit to 8 Digit, clarified as under:- "Implementation of the Central Excise Tariff (Amendment) Act, 2004 (8- Digit Classification Code)- Clarification regarding. I am directed to draw your attention to this Department's Notification No.6/2005-CE (NT) dated 24.2.2005, Issued from F.No.4/3/2002-CX.I (Part-II), which notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules to amend all the rules made under the said section and all the notifications Issued under the said rules and for the time being in force on the date of commencement of the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), except as respects things done or omitted to be done before such amendments, namely:- 1.(1) These rules may be called the Central Excise Removal of Difficulties) Rules, 2005 (2) They shall come into force on the date of the commencement of the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005). 2. In each of the rules made under Section 37 of the Central Excise Act, 1944 (1 of 1944), and in each of the notifications issued under these rules, for any reference to the Chapter, heading or sub-heading of the First Schedule or the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as the case may be, relating to any goods or class of goods, wherever referred to in the said rules or notifications, the corresponding reference to the Chapter, heading or sub-heading or tariff item, of the First Schedule or the Second Schedule to the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being excisable goods under Section 2(d) of the Central Excise Act. Furthermore, Rule 6 of the 2004 Rules, which is applicable only to excisable goods, can alone be treated as exempted goods for the purposes of Rule 6(3) of 2004 Rules, does not apply to electrical energy." 8.5 It is clear from the decision of the Hon'ble Allahabad High Court in the case of Gularia Chini Mills (supra), that the restructuring of Tariff from 6 digit to 8 digit with effect from 1.3.2005 would not involve any substantive change in the existing rules. It was taken care of the technical changes adopted in the numbering scheme for central excise classification through the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005). From the Legislative changes of Chapter 22 as mentioned above, it is clear that Chapter 22 does not cover alcoholic liquor for human consumption. Department accepted that prior to 1.3.2005, Rectified spirit was nil rate of duty under sub-heading No. 2204.90. After the introduction of 8 digit classification with effect from 1.3.2005, Heading 2207 covers ethyl alcohol and other spirits, denature, of any strength. On perusal of the impugned order, we find that the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le w.e.f. 1-3-2005 is totally wrong. We find that even though the molasses is first converted to Rectified Spirit, while converting the same, Carbon Di-Oxide is first manufactured and the same is cleared on payment of duty. Further, part of the Rectified Spirit is converted into Denatured Spirit which is also sold on payment of duty. Therefore, it cannot be said that Molasses is used only in the manufacture of Rectified Spirit. In other words, Molasses is used as a common input in the manufacture of exempted Rectified Spirit as well as dutiable Carbon Di-Oxide and Denatured Spirit. Hence, in terms of Rule 6 of Cenvat Credit Rules, if the credit on molasses used in or in relation to the manufacture of the said Rectified Spirit is reversed, there Is no violation of any provisions of law and the credit taken on Molasses cannot be denied. This issue is covered by the decision of this Bench In the case of NCS Distilleries/Estates Pvt. Ltd. v. CCE, Visakhapatnam 2007 (207) E.L.T. 400 (Tri.- Bang.) and the Final Order Nos. 56 to 59/2007 dated 30-11- 2006 [2007 (212) E.L.T. 234 (Tribunal)) in the case of The Godavari Sugar Mills Ltd. & Others v. CCE. It is on record that the appellants had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassified under heading 2204 as nil rate of duty. So, after 1.3.2005, it cannot be said that it is fit for human consumption. It is further observed that the exemption Notification No. 3/2005-CE would be extendable only to Heading No. 2207 2000 "denatured ethyl alcohol and other denatured spirits, of any strength". It has also observed that though the notification refers to "all spirits" would be read with reference to sub-heading No. 2207 2000. In our considered view, exemption Notification would be read independently. We have already discussed above that the expression "all spirits" has a wide meaning, irrespective of whether denatured or not. Taking into account of restructuring of the Tariff from 6 digit to 8 digit, we find that the position of sub-heading 2204.20 nil rate of duty is corresponding to Notification No. 3/2005. We have also noticed that the appellants discharged the obligation under Rule 6 of the CENVAT Credit Rules by paying 6% of the invoice value on the clearance of the Rectified spirit. Thus, the appellants are eligible to avail the benefit of Notification No. 67/95-CE dated 16.3.1995 in respect of molasses used in the manufacture of Rectified spirit and ENA. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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