TMI Blog2006 (11) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Dr. S.L. Peeran, Shri T.K. Jayaraman, JJ. REPRESENTED BY : S/Shri P.S. Manjunath, V.B. Gaikwad, Advocates, N. Venkataraman, Sr. Advocate and S. Muthuvenkataraman, Advocate, for the Appellant. S/Shri R.K. Singla, JCD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand of Rs. 2,47,53,225/- for the period from 1-10-2003 to 31-3-2004. Interest under Section 11AB has been demanded. A penalty of Rs. 10 lakhs has been imposed in terms of Cenvat Credit Rules, 2002. 2.2 Shri P. S. Manjunath, learned advocate appeared for the appellants and Shri R. K. Singla, learned JCDR appeared for the Revenue. 2.3 The learned advocate urged the following submissions. (i) The molasses produced by the appellants is cleared on payment of Central Excise duty by issue of invoice to the Distillery Unit and the molasses is used in the production of both dutiable and non-dutiable ethyl alcohol. The credit in respect of non-dutiable ethyl alcohol is reversed. Only in respect of the clearance of dutiable ethyl alcohol, the credit is utilized. Therefore, there is no violation of any provisions of Central Excise Rules. (ii) The Adjudicating Authority erred in holding that the Government of India Notification 67/1995 Central Excise dated 16-3-1995 has application to the facts of the case. Since Rectified Spirit is not dutiable, the said Notification has no application to the facts of the case. (iii) The Adjudicating Authority erred in not noticing that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the manufacture of Denatured Spirit (dutiable) and denatured ethanol (dutiable) and hence, it is clear that molasses is not only used in the manufacture of Rectified Spirit but also in the manufacture of Denatured Spirit as well as denatured ethanol. (ii) While selling the Rectified Spirit, the quantity of molasses used in or in relation to the manufacture of the said quantity of rectified spirit is determined and appropriate duty/Cenvat credit is paid/reversed on the said quantity of molasses as prescribed in Rule 6 of the Cenvat Credit Rules, 2004. Hence, denial of Cenvat credit/exemption under Notification 67/95 Central Excise dated 16-3-95 as amended by Notification No. 31/2001 Central Excise dated 1-6-2001 is unwarranted. (iii) The decision of Madhukar SSK Ltd. [2005 (190) E.L.T. 508 (T)] relied upon by the Department has not taken cognizance of the amendment made to Notification No. 67/95-Central Excise dated 16-3-95 vide Notification No. 31/2001-Central Excise dated 1-6-2001 wherein exemption is extended even if exempted final products are manufactured provided procedure under Rule 6 of the Cenvat Credit Rules is followed. (iv) Even otherwise, strict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant. They urged the following points. (i) In respect of the molasses captively consumed for the manufacture of Rectified Spirit and impure spirit, the learned advocate urged that the appellants are entitled for taking credit, provided the obligations prescribed in Rule 6 of Cenvat Credit Rules are followed. Further, it was pointed out that Rule 6(3)(a)(i) specifically refers to goods falling under 22.04 of the First Schedule (Current Heading 22 07 20 00 of the Central Excise Tariff Act, as amended by Act 4 of 2005) and consequently the obligation of the appellants would be to reverse the credit availed on inputs viz., various chemicals and once the credit is reversed, the appellants would be entitled to the benefit of captive consumption Notification No. 67/95-C.E. dated 16-3-1995 on the molasses used in the manufacture of Rectified Spirit and Denatured Spirit. (ii) The total input credit that needs to be reversed during the disputed period is Rs. 1,30,389/- whereas even according to the Order-in-Original, the appellants have paid a sum of Rs. 83.51,500/- by paying an amount equal to 10% on rectified spirit. What needs to be done is only reversal of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have cleared the molasses without payment of duty availing exemption under Notification 67/95. In the case of M/s. GMR Industries, the benefit of notification for captively consumed molasses has been availed. However, in all the cases the appellants have reversed the Cenvat credit attributable to exempted product. 7.2 It is the contention of the appellants that the reversal satisfies the conditions of Notification 67/95 read with Rule 6 of Cenvat Credit Rules, 2002. Notification 67/95 grants exemption from payment of duty on an intermediary product which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture of some other excisable product, then he molasses captively consumed need not discharge any duty burden. However, the entitlement to Notification 67/95 is subject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue, when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the mai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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