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2024 (2) TMI 815 - AT - Central ExciseCENVAT credit - capital goods installed in the distillery plant used for manufacture of Ethyl Alcohol - period from June 2011 to June 2012 - Erection, Commissioning & Installation services as input services availed after 01.04.2011 for setting up and installation of the distellery plant - exemption under Notification No. 67/1995-CE dt.16.03.1995 on the molasses consumed captively to manufacture Ethyl Alcohol - Requirement to pay an amount equal to 6% of value of the exempted goods in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 [CCR, 2004] under Rule 14 read with Sec 11A of the Central Excise Act, 1944 - levy of interest and penalty. Whether the Appellant is entitled to Cenvat credit on the capital goods installed in the distillery plant used for manufacture of Ethyl Alcohol during the period from June 2011 to June 2012? - HELD THAT:- While it is true that in the process of manufacture of the excisable goods, viz, denatured Alcohol, Ethyl Alcohol, which is otherwise not chargeable to central excise duty arises at an intermediate stage, and the last step of denaturing takes place in tankers itself. The manner in which the goods have left the factory is what matters with respect to central excise duty, whether it is a question of payment of central excise duty or the admissibility of CENVAT credit on the capital goods, inputs or input services. There is no good reason as to why the Cenvat credit on capital goods used in the distillery should be denied to the Appellant - neither the factor that an exempted good, viz, Ethyl Alcohol comes into existence prior to the manufacture of denatured Alcohol nor the fact that denatured Alcohol is not produced within the distillery machines, but in the tankers within the factory, should make any difference to the entitlement of Cenvat credit. Nothing in the CCR determines the eligibility of CENVAT credit based on at what stage the final goods become liable to central excise duty, and so long as the goods which are cleared from the factory are excisable goods, CENVAT credit on the capital goods cannot be denied. Revenue relied on the decision of Division Bench of this Tribunal in RAI BAHADUR NARAIN SINGH SUGAR MILLS LTD VERSUS COMMISSIONER OF CENTRAL GST, DEHRADUN [2023 (11) TMI 1163 - CESTAT NEW DELHI] to assert that no Cenvat credit can be given on capital goods used in the manufacture of a distillery unit. We have examined the decision in Rai Bahadur Narain Singh Sugar Mills. The facts in that case were different. The Assessee in that case was entitled to an Area based exemption notification, which it availed and hence it would not have been entitled to CENVAT credit on captial goods - In this case, there is no exemption for denatured Alcohol and CO2 manufactured by the Appellant from duty and there is no dispute that duty was liable to be paid and was paid. Since the present case is different on facts, we find that the decision relied upon by the Revenue will not come to its rescue. Whether the Appellant is entitled to Cenvat credit on the Erection, Commissioning & Installation services as input services availed after 01.04.2011 for setting up and installation of the distellery plant? - HELD THAT:- This Bench held in PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI [2021 (7) TMI 1094 - CESTAT HYDERABAD] that after 01.04.2011, although the services rendered in relation to installation and commissioning of the plant were not in the inclusive part of the definition but they were not excluded either and the main part of the definition of input service is broad enough to include the input services used in setting up and installation of the plant and machinery and hence CENVAT credit is admissible - the Appellant is entitled to Cenvat credit on the inputs used in setting up the plant and machinery. Whether the Appellant is entitled to claim exemption under Notification No. 67/1995-CE dt.16.03.1995 on the molasses consumed captively to manufacture Ethyl Alcohol? - HELD THAT:- There are no strong force in the submission of the learned Counsel that the adverse report of the Range Superintendent obtained after the Hearing was over, cannot be relied upon unless a copy is served upon the Appellant and it is given an opportunity to defend. The only matter of fact to be determined is if the appellant had fulfilled the requirements under Rule 6 of CCR or not. In view of the above, it is found that it is a fit case to be remanded to the Commissioner on this question, with a direction to provide or send a copy of the report of the Range Superintendent to the appellant and after giving the appellant sufficient opportunity to rebut the report and explain how it had fulfilled the obligation under Rule 6 of CCR, and pass a reasoned order after following principles of natural justice. Whether the Appellant is required to pay an amount equal to 6% of value of the exempted goods in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 [CCR, 2004] under Rule 14 read with Sec 11A of the Central Excise Act, 1944? - HELD THAT:- In M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT], it has been held by the Hon’ble High Court that the obligations under Rule 6(1) or Rule 6(2) or Rule 6(3) are various options given to the assessee and it is not for the Department to choose an option for the Assessee. If the assessee does not follow any of the options and fulfill its obligations, demand can be raised to deny the entire amount of Cenvat credit, but the assessee cannot be forced to pay an amount equal to 6% under Rule 6(3)(i) of CCR, 2004. Therefore, the demand equal to 6% of the value of exempted goods sold, under Rule 6(3) of CCR, 2004, cannot be sustained and needs to be set aside. Appeals are partly allowed and partly remanded.
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