TMI Blog2016 (11) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... table to inputs in the exempted product is reversed or paid 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 - There is an option for the manufacturer not to maintain two separate accounts. The denatured alcohol is acknowledged as an excisable good and 'output' in terms of CENVAT Credit Rules, 2004. There cannot be discriminatory treatment in the treatment accorded to two manufacturers of the same product merely on the ground that one uses captively produced molasses and the other procures from external sources - rectified spirit is an exempt goods and as the appellants do manufacture dutiable goods also, CENVAT Credit Rules does permit them to take credit of duty paid on molasses subject to compliance with Rule 6 of CENVAT Credit Rules, 2004. There is no finding that they have not reversed the CENVAT Credit taken on inputs that have gone into the exempt goods. This is sufficient compliance of Rule 6. They are, consequently, not required to be subject to recovery of duty on goods cleared by utilization of CENVAT Credit and not required to make good the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sakhar Karkhana Ltd 25/CEX/2013 dated 10 th Sep 2013. Rs.96,07,807/- Rs.9,00,000/- 10. E/87182/2013 09/CEX/2013 dated 27 th February 2013. Rs.1,22,96,926/- Rs.10,00,000/- 11. E/89195/2013 Sahakarmahars hi Bhausaheb Thorat Sahakari Sakhar 13/CEX/2013 dated 12th Jul 2013. Rs1,83,14,719/- Rs.18,00,000/- 12. E/86799/2013 07/CEX/2013 dated 24 th January 2013. Rs.8,29,92,493/- Rs.8,29,92493/- 2. The appellants are distilleries that source molasses, the primary input, from various sugar factories on payment of duty and on which CENVAT credit under CENVAT Credit Rules, 2004 is taken upon receipt of inputs in factory of manufacture. The credit taken is reversed proportionately upon clearance of rectified spirit chargeable to state excise duty. The manufacturing process involves addition of water and yeast to the molasses which ferment to transform the mixture into r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute relates to utilization of credit taken on the input under CENVAT Credit Rules, 2004 and the non-compliance with the conditions governing the Rules when exempted goods are manufactured using duty paid inputs on which credit has been taken. Rectified spirit cleared, as such, was considered as exempt goods and denatured spirit as excisable goods. The appellants resorted to reversal of credit in accordance with Rule 6(3)(a) of CENVAT Credit Rules, 2004 till 31th March 2008. Thereafter, the option of paying an amount equal to specified percentage of value of exempted goods or paying such amount as determined by formula in Rule 6(3A) of CENVAT Credit Rules, 2004 was being followed. 6. Rule 6 (l) of CENVAT Credit Rules, 2004 forbids recourse to credit of duty paid on inputs used in or in relation to manufacture and clearance of exempted goods except as provided for in the Rules. Subject to maintenance of separate accounts of receipt, consumption and inventory of inputs for manufacture of excisable and exempt goods, CENVAT credit is allowed to be taken under Rule 6(2) for manufacture and clearance of excisable goods. Should such separate accounts be not maintained, Rule 6(3), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antive changes in taxation and that the proceedings initiated were, therefore, incorrect. Reliance was placed on the decision of the Tribunal in re VAM Organic Chemicals [1989 (39) ELT 72 (T)] to contend that MODVAT credit could not be denied or varied even if non-dutiable intermediate goods emerge. It was also submitted that ethyl alcohol is not the sole product that emerges from the manufacturing process as carbon dioxide is a by-product besides clearing of denatured spirit which is a dutiable item. 9. Learned Authorized Representative took us through the provisions of the Constitution of India demarcating taxation powers between Union and states and thereby rendering ethyl alcohol to be a non-excisable item; being non-excisable, the procurement of molasses would not be an input and, hence, eligibility for CENVAT credit was non-existent. Drawing upon technical material, he contended that ethyl alcohol was a distinct produce and that denaturing was a separate and distinct process of manufacture that used ethyl alcohol as an input; holding forth that such usage of ethyl alcohol was not captive consumption within the meaning of Central Excise Rules, it was submitted that this f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and dutiable goods using duty-paid molasses. It would appear that the appellants have been following the procedure laid down in Rule 6 of CENVAT Credit Rules, 2004 and reversing credit taken on inputs at the time of clearance of rectified spirit. 12. The Tribunal has consistently been taking the stand that in case of molasses used for manufacture of rectified spirit and de-natured alcohol by distilleries, compliance with Rule 6 of CENVAT Credit Rules, 2004 is sufficient. In Vishwanath Sugars Ltd v. Commissioner of C. Ex. Belgauam [2010 (250) ELT 390 (Tri-Bang)], the Tribunal held that clearance of dutiable de-natured spirit even for a part of the year was sufficient for allowing proportionate credit of duty paid on inputs used in common with exempted goods. 13. Our attention is drawn to decision of the Hon'ble Supreme Court in the matter of Commissioner of Central Excise, Salem v. M/s Sakthi Sugars Ltd . in CA D. No. 28938 of 2015 filed by Revenue against order of Tribunal in Sakthi Sugars Ltd v. Commissioner of Central Excise, Salem (Final Order No. 802/2007 dated 26 th June 2007) [2008 (230) ELT 676 (Tri-Chennai)]. The Hon'ble Supreme Court has accorded its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit rules, 2002. What is the obligation under Rule 6 of the Cenvat Credit rules, 2002? The obligation under rule 6 of Cenvat Credit Rules, is that when a manufacturer uses input both for exempted and dutiable final products, he should maintain separate accounts because no Cenvat credit is available for the inputs used in exempted products. There is an option for the manufacturer not to maintain two separate accounts. 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 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. The above observations squarely cover the subject case. Following the ratio of the above decision, we allow the subject appeal filed by SSL' From the above decision, it is clear that denatured alcohol is acknowledged as an excisable good and 'output' in terms of CENVAT Credit Rules, 2004. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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