TMI Blog2014 (11) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-CE dated 24.2.2005 was issued to preserve the existing duty rate. So, it is clearly evident that the Rectified Spirit existing NIL rate of duty under Sub-heading No. 2204.90 has been covered under Serial No. 14 of the Table appended to Notification 3/2005-CE. In view of the above Board Circular, we find merit in the submission of the learned Advocate that with effect from 28.2.2005, Rectified Spirit and ENA are exempted goods, covered under Notification No.3/2005-CE. After re-structuring of Central Excise Tariff from 6 Digit to 8 Digit with effect from 1.3.2005, Rectified Spirit and ENA are exempted by Notification No. 3/2005-CE (supra) and the appellant discharged the obligations under Rule 6 of the CENVAT Credit Rules, 2004 in respect of clearance of Rectified Spirit and ENA and therefore denial of exemption Notification No. 67/95-CE (supra) on Molasses captively consumed in Rectified Spirit and ENA cannot be sustained. Accordingly, denial of CENVAT credit on the Molasses purchased from other sugar mill used in the manufacture of Rectified Spirit and ENA are also liable to be set aside. We have also noted that inputs and input service are not exclusively used for generation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tariff from 6 Digit to 8 Digit with effect from 1.3.2005, the un-denatured Ethyl Alcohol removed was removed from 8 Digit Central Excise Tariff and Sub-heading 2207 2000 carries only spirits and Ethyl Alcohol denatured of any strength. According to Revenue, Rectified Spirit and ENA are non-excisable goods with effect from 1.3.2005 and therefore, the appellants are not eligible to avail benefit of exemption Notification No. 67/95-CE (supra) on Molasses captively used in the manufacture of Rectified Spirit and ENA. 4. Show Cause Notices were issued proposing to deny the benefit of exemption notification No. 67/95-CE dated 16.3.1995 on molasses manufactured and cleared for captive consumption in the manufacture of Rectified Spirit, Extra Neutral Alcohol (ENA), Neutral Alcohol (NA) etc. are in the form of Undenatured Ethyl Alcohol and are not specified in the First Schedule to the Central Excise Tariff Act, 1985. It has also proposed to recover CENVAT credit availed on Molasses received from other sugar mills. The adjudicating authority confirmed the demand of duty on the molasses captively consumed in the manufacture of Rectified Spirit and ENA, denying the benefit of Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on:- (a) Gularia Chini Mills Vs. Union of India - 2014 (34) STR 175 (All.) (b) Ugar Sugar Works Ltd. Vs. CCE - 2007 (214) ELT 33 (c) Ugar Sugar Works Ltd. Vs. CCE 2008 (232) ELT 81 (d) CCE Vs. M/s. Bazpur Cooperative Sugar Factory Ltd. - 2014-TIOL-1733-HC-UKHAD-CX (e) Synthetics Chemicals Ltd. Etc vs State Of U.P. And Ors. - AIR 1990 SC 1927, at para 73. 6.4 He also relied on the Boards Circular No. 808/5/2005-CX dated 25.2.2005. Rectified Spirit and ENA are covered under sub-heading 2207 20 00 after restructuring of the Tariff. There is no dispute that Rectified Spirit and ENA are not fit for human consumption and therefore as per Chapter Note 4, Chapter 22, it will be covered under Chapter 22. Prior to restructuring, Note 1 of Chapter 22 excluded alcoholic liquor fit for human consumption. 6.5 He also relied upon Rule 4 of the Interpretative Rules to HSN (Harmonized System Nomenclature) to substantiate that even if Rectified spirit is not specifically mentioned in the Tariff, it is akin to the description of the Tariff Entry in 2207 2000 which reads as Ethyl Alcohol and other spirits. 6.6 Regarding the denial of CENVAT credit on the molasses purchased from outside, he submits th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Kothari Sugars Chemicals Ltd. Vs. CCE, Trichy - 2010 (262) ELT 545 (b) Venkateshwara Winery Distillery Ltd. Vs. CCE, Hyderabad - 2013 (295) ELT 306 7.5 He also relied upon the statement of Shri Vedanayagam, Deputy General Manager, referred in Appeal No. E/41181/2014 in the case of Dharani Sugars Chemicals recorded on 27.2.2013 to substantiate that it is under the control of State Excise authority. Rectified spirit is denatured only for the purpose of avoiding misuse of alcohol for human consumption. 7.6 Regarding Notification No. 67/95, he submits that the Table appended to Notification covered CENVAT Credit Rules, 2001 and not Rules, 2004. He relied upon the decision of the Hon ble Supreme Court in the case of Novopan India Ltd. Vs. CCE - 1994 (73) ELT 769 (SC) and CCE Vs. Sunder Steels Ltd. - 2005 (181) ELT 154 (SC). 7.7 Regarding the denial of CENVAT credit, as per Rule 2(h) of the CENVAT Credit Rules, 2004, Rectified spirit would not be treated as excisable goods and therefore the eligibility of CENVAT credit does not arise. 8. After hearing both sides and on perusal of the records, we find that the main issue involved in these appeals is whether after re-structuring of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ethyl alcohol and other spirits, denatured of any strength . The relevant portion of Heading 2207 is reproduced below:- Heading No. Description of goods Rate of Duty (1) (3) (4) 2207 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion ************* 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 notifies that the Central Excise Tariff (Amendment) Act, 2004 will come into force with effect from 28th February 2005. The said Act is being uploaded on the CBEC website, (www.cbec.gov.in). 2. Accordingly, all the field officers must ensure implementation of the amended Tariff Act (includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005) shall be deemed to have been substituted. No. 4/3/2002-CX.I (Pt.II) Abhay Kumar Srivastav Deputy Secretary to the Government of India Note : This notification intends to take care of the technical change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 contended before the Adjudicating authority that Rectified Spirit with 95% strength was removed from the factory. It cannot be alcoholic liquor for human consumption. Both Rectified Spirit and Denatured Ethyl Alcohol are only varieties of Ethyl Alcohol and liquor for human consumption. As per Dictionary meaning, Rectified Spirit is distilled Ethanol with only 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, 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 reversed total Cenvat credit of ₹ 1,22,49,550/- attributable to the molasses used in or in relation to the manufacture of 3073155 ltrs. of Rectified Spirit cleared without payment of duty. 8.7 In the case of CCE Vs. M/s Bazpur Cooperative Sugar Factory Ltd. - 2014-TIOL-1733-HC-UKHAD, the Hon ble Uttarkhad High Court held that Rect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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. 8.9 The learned AR for Revenue relied upon the decision of the Hon ble Bombay High Court in the case of Niphad Sakhar Karkhana Ltd. Vs. CCE - 2014 (300) ELT 66 (Bom.). In that case, the assessee filed appeal along with stay application before the Tribunal. By stay order, the Tribunal directed the assessee to predeposit a sum of Rs. One crore out of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Home, Prohibition and Excise III Department dated 4.9.1992 prescribed the collection of an Administrative Service Fee of ₹ 0.50 paise per bulk itre of spirit produced in the distillery before the spirit in issued from the distillery, to cover the service charges including expenditure on staff. The statements as referred by the learned AR are in this context. 8.11 The learned AR submits that the Table of the Notification No. 67/95 referred the CENVAT Credit Rules, 2001 and not Rules, 2004. In this case, we find that the adjudicating authority accepted that prior to 1.3.2005, the appellants are eligible for the benefit of exemption Notification No. 67/95 and therefore the submission of the learned AR for the Revenue has no merit. Apart from that, the Honble Supreme Court in the case of Vikram Cement Ltd. - 2006 ELT 194) 3 (SC) held that the schemes of MODVAT and CENVAT credit are not different. 8.12 It is seen from the above, that after re-structuring of Central Excise Tariff from 6 Digit to 8 Digit with effect from 1.3.2005, Rectified Spirit and ENA are exempted by Notification No. 3/2005-CE (supra) and the appellant discharged the obligations under Rule 6 of the CENVAT Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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