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2006 (11) TMI 497 - AT - Central ExciseCenvat/Modvat - capital goods and inputs - Whether the Modvat credit availed in respect of the molasses used for manufacture of Rectified Spirit and Denatured Spirit, is in consonance with Rule 6 of Cenvat Credit Rules 2002 read with Notification No. 67/95-CX - reversed the Cenvat credit attributable to exempted product - HELD THAT:- In the present case, Rule 6(3)(a)(i) specifically refers to goods falling under 22.04 of the First Schedule (presently 22 07 20). In other words, 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. This obligation from the records of the case appears to have been discharged in respect of all the appellants. Therefore, the appellants are entitled to the benefit of Notification No. 67/95 in respect of molasses used captively for manufacture of Rectified Spirit and Denatured Spirit. Therefore, the demand of duty in respect of the credit taken on molasses is not correct. In respect of the Appeal of M/s. GMR Industries, the Cenvat credit on capital goods and inputs used in the ethanol plant has been denied on the ground that on the date of passing the adjudication order, ethanol plant has been used only for production of exempted products. This finding is incorrect, as Para 7 of the Show Cause Notice concedes that the appellants are producing both Rectified Spirit and Denatured Spirit. In these circumstances, the demand in respect of the credit on capital goods, inputs and inputs services availed and utilized in ethanol plant cannot be sustained. They have already referred to the Show Cause Notice. In view of the above finding, the levy of penalties and demand of interest are also not sustainable. We set aside the above Orders-in- Original and allow these appeals with consequential relief.
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