TMI Blog2024 (2) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... :- While it is true that in the process of manufacture of the excisable goods, viz, denatured Alcohol, Ethyl Alcohol, which is otherwise not chargeable to central excise duty arises at an intermediate stage, and the last step of denaturing takes place in tankers itself. The manner in which the goods have left the factory is what matters with respect to central excise duty, whether it is a question of payment of central excise duty or the admissibility of CENVAT credit on the capital goods, inputs or input services. There is no good reason as to why the Cenvat credit on capital goods used in the distillery should be denied to the Appellant - neither the factor that an exempted good, viz, Ethyl Alcohol comes into existence prior to the manufacture of denatured Alcohol nor the fact that denatured Alcohol is not produced within the distillery machines, but in the tankers within the factory, should make any difference to the entitlement of Cenvat credit. Nothing in the CCR determines the eligibility of CENVAT credit based on at what stage the final goods become liable to central excise duty, and so long as the goods which are cleared from the factory are excisable goods, CENVAT credit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it is a fit case to be remanded to the Commissioner on this question, with a direction to provide or send a copy of the report of the Range Superintendent to the appellant and after giving the appellant sufficient opportunity to rebut the report and explain how it had fulfilled the obligation under Rule 6 of CCR, and pass a reasoned order after following principles of natural justice. Whether the Appellant is required to pay an amount equal to 6% of value of the exempted goods in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 [CCR, 2004] under Rule 14 read with Sec 11A of the Central Excise Act, 1944? - HELD THAT:- In M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] , it has been held by the Hon ble High Court that the obligations under Rule 6(1) or Rule 6(2) or Rule 6(3) are various options given to the assessee and it is not for the Department to choose an option for the Assessee. If the assessee does not follow any of the options and fulfill its obligations, demand can be raised to deny the entire amount of Cenvat credit, but the assessee cannot be forced to pay an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty not paid on 6284 MTs molasses cleared and consumed captively by wrongly availing the exemption under Not. No. 67/95-CE dt.16.3.1995 under Sec 11A(10) of CEA, 1944 Rs.2,07,41,625/- Interest under Sec 11AA of CEA, 1944 As applicable Penalty under Sec 11AC of CEA, 1944 Rs.20,00,000/- E/30369/2023 : Period of dispute January 2017 March 2017 Date of Show Cause Notice (s) 07.02.2019 18.03.2019 Date of Order-in-Appeal 28.04.2023 Demand of Central Excise duty not paid on molasses cleared and consumed captively by wrongly availing the exemption under Not. No. 67/95-CE dt.16.03.1995 under Sec 11A(10) of CEA, 1944 Rs.4,31,432/- Interest under Sec 11AA of CEA, 1944 As applicable Penalty under Sec 11AC of CEA, 1944 Rs.6,60,000/- Since these three appeals deal with common issues, they are being disposed of together. 2. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... List of the Seventh Schedule to the Constitution). There is no dispute about this legal position. The Appellant used the molasses manufactured, in its distillery plant to produce Alcohol which it, either cleared on payment of State Excise duty or it cleared it after denaturing it on payment of Central Excise duty. The denatured Alcohol becomes unfit for human consumption, because of the denaturants. In the present case, the denaturant which was used was Methanol which the buyers of denatured alcohol bought on account of the appellant and carried it in the tankers to the distillery of the appellant. The appellant filled ethyl alcohol in these tankers and the methanol which was already in the tankers, mixed with the ethyl alcohol and it became denatured alcohol, and was cleared as such from the distillery after paying appropriate central excise duty. CENVAT credit on capital goods used in setting up the distillery plant 7. The case of the Department is that since the capital goods used in setting up the distillery plant were used in the manufacture of an exempted product, viz., Ethyl Alcohol, no Cenvat credit was admissible to the Appellant and although part of the ethyl al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty, and so long as the goods which are cleared from the factory are excisable goods, CENVAT credit on the capital goods cannot be denied. We, therefore, find in favour of the Assessee and against the Revenue, in so far as the issue of Cenvat credit on capital goods used in distillery is concerned. 10. Learned AR for Revenue relied on the decision of Division Bench of this Tribunal in Appeal E/50804/2019 of Rai Bahadur Narain Singh Sugar Mills Ltd vs Commissioner of Central GST, Dehradun, decided by Final Order No. 51568/2023 dt.29.11.2023 to assert that no Cenvat credit can be given on capital goods used in the manufacture of a distillery unit. We have examined the decision in Rai Bahadur Narain Singh Sugar Mills. The facts in that case were different. The Assessee in that case was entitled to an Area based exemption notification, which it availed and hence it would not have been entitled to CENVAT credit on captial goods. However, it paid some amount as Excise duty on the CO2 and denatured Alcohol cleared by it and claimed the Cenvat credit on the entire capital goods. A coordinate bench of this Tribunal held that the molasses and Ethyl Alcohol manufactured by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the Appellant is that it was entitled to Cenvat credit. According to the learned counsel for the appellant, the defintion of input service has three parts and the means part of the defintion is moderated by the includes part and the excludes part. The includes part enlarges the means part while the excludes part restricts it. What is already in the means part need not be again included in the includes part. Once the service is covered in the means part, CENVAT credit will be admissible unless it is excluded by the excludes part of the definition. The services in dispute were undisputedly used in erection and commisioning and installation of the distillery plant. Without these services and the plant, manufacture of the denatured alcohol - an excisable goods is impossible. Therefore, the services were used in or in relation to the manufacture of denatured alcohol and hence CENVAT credit is admissible as per the means part of the defintion itself. Learned Counsel relies on the case of Pepsico India Holdings (Pvt) Ltd vs CCT, Tirupati [2022 (56) GSTL 22 (Tri-Hyd)]. 14. We have considered the submissions on both sides with respect to this part of the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) (l) (2) The words and expressions used in these rules and not defined but defined in the Excise Act shall have the meanings respectively assigned to them in the Excise Act. 19. Since the term manufacture is not defined in the Rules, the definition under the Central Excise Act, 1944 must be considered. Section 2(f) of the Central Excise Act defines manufacture as follows: 2(f) manufacture includes any process (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the Fourth Schedule as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as such and some after denaturing 16. The third point of dispute is regarding the non-payment of Central Excise duty on molasses captively consumed by the Appellant. It is the case of the Department that the Appellant had wrongly availed the benefit of Notification No. 67/1995-CE dt.16.03.1995 on the molasses, which it had captively consumed. Learned Counsel for the Appellant submits that in the impugned Order, the Commissioner had relied on the judgment of the Hon ble Supreme Court in the case of Commissioner vs Sakthi Sugar Ltd [2016 (332) ELT A194 (SC)] and Tribunal Bangalore in the case Godavari Sugar Mills Ltd vs CCE, Belgaum [2007 (212) ELT 234 (Tri-Bang)] and Ugar Sugar Works Ltd vs CCE, Belgaum [2008 (232) ELT 81 (Tri-Bang)] in which it has been held that once the manufacturer discharges its obligations under Rule 6 of CCR, 2004, it is eligible for the exemption from duty on the goods captively used in the manufacture of further goods. The Commissioner followed this decision and in order to verify, if the Appellant had fulfilled its obligations under Rule 6 of CCR, called for a report from the Range Superintendent, who by his letter dt.28.10.2016 reported as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not discharged its obligatoins under Rule 6(3A) of CCR and held that the Appellant had not fulfilled the conditions laid down in Notification No. 67/1995-CE. Therefore, he denied the benefit of the exemption and demanded duty on molasses. 18. Learned Counsel for the Appellant submits that the Commissioner had agreed with its submissions, that once the provisions of Rule 6 of CCR are followed, it will be entitled to the benefit of exemption notification and there is no dispute about it. The only question is if it had fulfilled its obligations under Rule 6 of CCR or not. According to the Appellant, it had fulfilled the obligations, while according to the Revenue, it had not fulfilled the obligations. Learned Counsel for the Appellant submits that the report of the Range Superintendent was obtained by the Commissioner after the Personal Hearing in the matter, and a copy of it was never sent to the Appellant so that it could defend its position and show how it had fulfilled the obligations under Rule 6. No reliance could have been placed by the Commissioner on this report of the Range Superintendent, without even giving it a copy of the report. 19. Learned authorised represe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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