2007 (11) TMI 522 - AT - Central Excise

Cenvat/Modvat credit - Molasses - The appellant takes CENVAT credit on the Molasses used in the manufacture of Rectified Spirit/Denatured Spirit - contention of the Revenue that w.e.f. 1-3-2005 Rectified Spirit has become non-excisable and therefore no Cenvat Credit could have been availed by the appellant - Held that - 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. CENVAT credit - furnace oil used to generate steam - Held that - The steam is partly used for generation of electricity and partly for processing the molasses in the distillery resulting in the production of Carbon Di-Oxide and Rectified Spirit/Denatured Spirit. Therefore it cannot be said that the furnace oil is used only in the manufacture of Rectified Spirit. It is actually a common input used in the manufacture of exempted Rectified Spirit/dutiable Denatured Spirit and Carbon Di-Oxide - there is no need for reversal of credit on any portion of furnace oil attributable to Rectified Spirit. There is no justification for imposition of any penalty or demand of interest under Section 11AB. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal challenging denial of Cenvat credit on 'in-house' manufactured Molasses, imposition of penalty, and demand in respect of denatured spirit cleared during a specific period.

Analysis:
The appeals in question, E/134/2007 and E/146/2007, contested the denial of Cenvat credit on 'in-house' manufactured Molasses, penalty imposition, and demand related to denatured spirit clearance during specific periods. The Commissioner of Central Excise, Belgaum confirmed the demands in both cases. The appellants argued that a similar issue had been decided in their favor in a previous case, providing a copy of the order for reference. The learned Counsel emphasized that the issue was covered in their favor and referred to another case supporting their contention. On the contrary, the learned SDR reiterated the departmental view. The Tribunal found that the issue was indeed covered by previous decisions, specifically citing the case of The Ugar Sugar Works Ltd. v. CCE, Belgaum. The Tribunal analyzed the manufacturing process, the utilization of Molasses, and the applicability of CENVAT credit rules. It was established that the credits on Molasses and Furnace Oil were valid, leading to the conclusion that the impugned order lacked merit. Consequently, the Tribunal allowed the appeals with no justification for penalty imposition or interest demand under Section 11AB.

The Tribunal detailed the manufacturing process involving Molasses, Rectified Spirit, Denatured Spirit, and Carbon Di-Oxide, emphasizing the common input usage in the production of exempted and dutiable products. The Revenue contended that Rectified Spirit became non-excisable from a specific date, challenging the availed CENVAT credit. However, the Tribunal clarified the incorrectness of this contention based on the restructured tariff and established that Molasses was utilized in various product manufacturing. Referring to relevant case laws, the Tribunal concluded that the credit availed on Molasses was legitimate and did not require reversal. The Tribunal highlighted the utilization of furnace oil for steam generation, electricity production, and processing Molasses, reaffirming its stance on the admissibility of Modvat Credit for fuel oil usage in intermediate product manufacturing. Consequently, the Tribunal upheld the validity of credits on Molasses and Furnace Oil, leading to the allowance of the appeals without penalty imposition or interest demand under Section 11AB.