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M/s The Salem Co-Operative Sugar Mills Ltd. Versus Commissioner of Central Excise, Salem

2017 (12) TMI 314 - CESTAT CHENNAI

CENVAT credit - manufacture of dutiable as well as exempt goods - Un-Denatured Ethyl Alcohol/ Rectified Spirit - Whether Un-Denatured Ethyl Alcohol/ Rectified Spirit manufactured by the assessee are "exempted goods" in terms of Rule 2(d) of the CCR, 2004 and consequently, whether the provisions of Rule 6(3) of the CCR, 2004, apply to the present case? - Whether the assessee is liable to pay 10% of the value of Un-Denatured Ethyl Alcohol/Rectified Spirit at all in terms of Rule 6(3)(b) of the Cen .....

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However, after January, 2006, the appellants reversed 10% of the price of Un-Denatured Ethyl Alcohol in terms of Rule 6(3)(b). - Whether with effect from 01.03.2005 Un-Denatures Ethyl Alcohol is an exempted product-as alleged by department or non-excisable product as contended by appellant? - Held that: - The erstwhile Tariff Heading 22.04 covered by both Denatured and Un-Denatured Ethyl Alcohol. The Denatured Ethyl Alcohol was subject to 16% duty. Alcohol other than Denatured Ethyl Alcohol .....

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Denatured Ethyl Alcohol is non- excisable is not without force. - Un-Denatured Alcohol are not specified goods under Rule 6(3)(a) and the demand is unjustified - appellant is not liable to pay 10% of the price in terms of Rule 6(3)(b) of CCR, 2004. - Appeal allowed - decided in favor of appellant. - E/00038/2008 - Final Order No. 41705/2017 - Dated:- 10-8-2017 - Smt. Sulekha Beevi CS, Judicial Member and Shri Madhu Mohan Damodhar, Technical Member For the Appellant : Shri Hari Radhakrish .....

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nufacture of Rectified Spirit. The appellants availed credit of the duty paid on molasses both in-house manufactured as well as that procured from outside. The appellants removed the Un-Denatured Alcohol without payment of duty. The department entertained a view that Un-Denatured Alcohol removed by appellants was excisable exempted goods. Rule 6 of the Cenvat Credit Rules bars the availment of credit on inputs used for exempted goods. The appellants did not maintain separate accounts of the comm .....

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f Rule 6(3)(b) of Cenvat Credit Rules, 2004, the department was of the view that appellant has to reverse entire credit attributable to the input (molasses) used for manufacture of non-dutiable Un-Denatured Ethyl Alcohol in terms of Rule 6(3)(a)(i) and thereby, on intimation by Range Officer, the appellants reversed the differential amount of ₹ 66,76,083/- under protest. A showcause notice, dated 05.02.2007 was issued raising the above allegations and after due process of law, the original .....

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ed in 2016 (343) E.L.T.462 (Tri. -Chennai) had held that demand raised in terms of violation of Rule 6(3) (a) (i), alleging wrongful availment of credit on molasses used in manufacture of Rectified Spirit/Denatured Ethyl Alcohol, which is exempted goods is not sustainable. The appellant contended that since the final products are un-denatured product, the appellant need not even pay an amount @10% of the price of the un-denatured product in terms of Rule 6(3)(b). The Tribunal vide the Interim Or .....

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points:- (i) The respondents having failed to maintain separate accounts for dutiable and non-dutiable goods. Hence, had to follow procedure Rule 3 of the Cenvat Credit Rules, 2004; (ii) Non-Denatured Ethyl Alcohol is exempted goods, the duty being levied is "NIL" as per Central Excise (Removal of Difficulties) Rules, 2005. Consequently, the respondent had to reverse the Cenvat credit actually availed as per the Order-in-Original passed by the Adjudicating authority; (iii) The CESTAT h .....

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consequently, whether the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 , apply to the present case? (vi) Whether the assessee is liable to pay 10% of the value of Un-Denatured Ethyl Alcohol/Rectified Spirit at all in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2004? 3. Thus, the matter has come before us for re-adjudication as per remand order of the Hon'ble Madras High Court. On behalf of the appellant, the learned counsel Shri Hari Radha Krishnan reiterated the grounds o .....

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exempted product using common input/molasses and, therefore, is bound to maintain separate accounts for the use of the common input. As the appellant did not maintain separate account, the demand has been raised. (ii) That the Un-Denatured Ethyl Alcohol is not an excisable goods and, therefore, the appellant need not maintain separate account. Though, Commissioner holds that Un-Denatured Ethyl Alcohol is non-excisable, demands the duty under Rule 6(3)(a), which is highly erroneous. (iii) With e .....

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se (a) of sub-rule 3 of Rule 6 of Cenvat Credit Rules, Since, Un-Denatured Ethyl Alcohol is non-excisable goods, during the relevant period, the appellant is eligible for exemption in terms of Notification No.67/95, dated 16.03.1995. In this regard, he relied on the Tribunal's decision in the case of Kothari Sugars & Chemicals Ltd. Vs Commissioner of Central Excise, Trichy reported in 2010 (262) EL. T. 545 (Tri, -Chennai). (iv) The appellant had paid 10% of the price in terms of Rule 6(3 .....

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findings in the impugned order. He relied upon the decision in the case of Ugar Sugar Works Ltd. Vs Commissioner of Central Excise, Belgaum reported in 2007 (214) E.L.T. 337 (Tri. Bang.). Rule 6(3)(a)(i) specifically refers to goods falling under heading 22.04 of First Schedule. With effect from 01.03.2005, the products of this heading fall under 22.07. That the final product, Ethyl Alcohol, if de-natured to any strength would be covered by this Chapter Heading. Therefore, appellants are liable .....

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ey manufactured Denatured Ethyl Alcohol (dutiable) and Un-Denatured Ethyl Alcohol (non-dutiable) using molasses. Till 01.03.2005, Un-Denatured Ethyl Alcohol came under CH 2204 carrying "NIL" duty. 7. Under Cenvat Credit Rules, 2004, where an assessee manufacturer dutiable and non-dutiable product from the same input, Rule 6(2) provides that the manufacturer has to maintain separate accounts and inventory of the inputs used in dutiable and non-dutiable products. If it is not possible to .....

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ts have not maintained separate accounts. However, after January, 2006, the appellants reversed 10% of the price of Un-Denatured Ethyl Alcohol in terms of Rule 6(3)(b). It is the case of the appellants that they are not bound to pay even this amount and has reversed only on pressure from the department. The department alleges that appellant has to reverse the entire credit attributable to molasses in terms of Rule 6(3)(a). 8. The issue revolves around the question, whether with effect from 01.03 .....

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Removal of Difficulties) Rules, 2005 vide Notification CE(NT), dated 24.02.2005 to contend that the Un-Denatured Ethyl Alcohol is covered by CETA, and is excisable product. In terms of the above Rules, "Any reference to Chapter, heading or sub-heading of the First Schedule or Second Schedule to the Central Excise Tariff Act, 1985 as the case may be, relating to any goods or class of goods wherever referred to in the sale rules or notifications, the corresponding reference to the Chapter, he .....

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cohol of an strength 16% 2204.90 Other NIL 10. As seen above, the erstwhile Tariff Heading 22.04 covered by both Denatured and Un-Denatured Ethyl Alcohol. The Denatured Ethyl Alcohol was subject to 16% duty. Alcohol other than Denatured Ethyl Alcohol (Un-Denatured Ethyl Alcohol) carried "NIL" rate of duty. In the revised Tariff Schedule (w.e.f. 01.03.2005), there is no corresponding Heading/sub-heading for Undenatured Ethyl Alcohol. The Central Excise as well as Customs Tariff was alig .....

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