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Commissioner of Central Excise, Meerut-I Versus M/s Bajaj Hindusthan Ltd.

Cenvat Credit - input services used in intermediate exempted goods - manufacture of rectified spirit an exempt product which have been further used in the factory of the respondent for manufacture of denatured spirit, which is cleared on payment of duty - Held that:- in cases where intermediate product comes into existence, even though no duty is paid on the intermediate product as it is exempted from the duty or is chargeable to nil rate of duty, credit will still be allowable so long as duty i .....

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Appeal No. 2886-2887/10 - Dated:- 29-10-2015 - Anil Choudhary, Member (J) For the Appellant : Shri Vikram Kaushik, AC (AR) For the Respondent : Shri Pradeep Kumar Mittal, Adv ORDER Per Anil Choudhary The revenue is in appeal against common order in appeal number 48-49/CE/MRT-1/2010-11 dated 28/5/10 whereby dismissing the appeal of revenue the ld. Commissioner (Appeals) held that the respondent assessee is entitled to Cenvat credit on input services utilised in the manufacture of rectified spirit .....

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under the provisions of Central Excise Tariff Act. Rectified spirit is taxable under State Excise law. After manufacture of Absolute Alcohol or rectified spirit, a part of it is denatured by adding denaturants like, crotonal dehyde, which makes it fit for industrial use and unfit for human consumption. It appeared to revenue that no manufacturing process is involved in making of denatured spirit from absolute alcohol. It further appeared that the process of manufacture of denatured spirit from .....

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acture of non-excisable/exempted products. Accordingly two separate show cause notices were issued for the period 2005-06 and 2006-07 and an other notice for the period June 2008 to Feb., 2009 requiring the assessee to show cause as to why inadmissible Cenvat credit of service tax on input service, should not be demanded and recovered from them under Rule 14 of CCR read with Rule 6 (3) read with section 73 of the Act along with interest and penalty. 3 The respondent contested the SCN and the sam .....

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It was further observed that Central Excise duty on the goods manufacture in India is levied by virtue, of entry number 84 of the 7th schedule to the Constitution which exempts duty on alcoholic liquor for human consumption. It was further observed that rectified spirit being alchoholic goods is manufactured first and thereafter, after adding denaturant denatured/ethyl alcohol is manufacture and sold on payment of duty. It was aiso observed that such Cenvat credit was never denied to the assesse .....

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sessee vide OIO number 13/Commissioner/MRT-1/2009 dated 31/3/09, it have been held that Cenvat credit on input services used in the distillery for manufacture of None dutiable/exempted intermediate product which in turn are used for manufacture of final dutiable product is eligible to the respondents. 5. Being aggrieved the revenue is in appeal before this Tribunal on the ground among others that prior to 1/3/05 rectified spirit was classifiable under the heading number 2204. 90 of the CET Act a .....

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and as such the respondent assessee is not entitled to Cenvat credit as the input or input services have been used in manufacture of an exempt product. It is further urged that Cenvat credit cannot be denied on exempted intermediate product but in the present case the product "rectified spirit" or "absolute alcohol" is intermediate product as well as final product, being marketable, as such and at the same time non-excisable. Accordingly the ld. Commissioner have erred in hol .....

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without payment of duty and whether the Tribunal was correct in allowing Cenvat credit by placing reliance on its earlier judgement in the case of Sterlite Industries Ltd. : 2005 (183) ELT 353 8without taking into cognizance the provisions of Rule 2(d), 2 (f), 3 and 4(5)(a) of the Cenvat credit rules. The Honourable High Court held that the Tribunal rightly held that clearing of goods at intermediate stage was not at part with clearing of exempted goods. Under the circular of the Board (665/56/ .....

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: 2009 (241) ELT 497 wherein capital goods were used for producing intermediate products, the question before the High Court was whether Tribunal was correct in allowing modvat credit of duty paid on capital goods/Spares by notification number 60/94 - CE dated 21/10/94, comes into effect from 21/10/94 and credit was taken during the period April 94 to September 94 and whether Tribunal was correct in allowing modvat credit of duty paid on capital goods and spares, namely Cardiga of Combing machi .....

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table and relying on the circular dated 25/9/02 held that Cenvat credit should not be denied on the capital goods used in the manufacture of intermediate products excampt from payment of duty which are used Duly in the manufacture of finished goods which are chargeable to duty and held that modvat credit of duty paid on capital goods cannot be denied. The ld. Counsel also relies on the ruling of Honourable Supreme Court in the case of Escorts Ltd. Vs. CCE : 2004 (171) ELT 145 wherein under notif .....

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