The Chennai bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the benefit of excise duty exemption allowable on molasses captively consumed for the manufacture of rectified spirit and quashed the duty demand.
M/s. EID Parry (India ) Ltd, the appellant is engaged in the manufacture of Sugar, Molasses and Denatured Ethyl Alcohol falling under Tariff Items 1701.11.90, 1703.10.00 and 2207.2000 respectively. They cleared Sugar, Molasses and Denatured Ethyl Alcohol on payment of duty. However, Molasses was also captively consumed within the factory for the production of DNA and Rectified Spirit, which is an un-denatured Ethyl Alcohol of a concentration of about 95%.
In respect of molasses so captively consumed, the appellant was availing exemption under notification No.67/95-CE dt. 16.03.1995 as amended. As per the said notification it exempts from payment of duty on ‘inputs’/capital goods used in the manufacture of final products as long as the final product is not exempt from duty or is not chargeable to nil rate of duty.
The department was of the view that the Rectified Spirit manufactured using the captively consumed molasses was not an excisable good and does not come within the definition of a ‘finished product’. Therefore, the exemption availed under notification 67/95 concerning molasses used for the production of Rectified Spirit is incorrect. SCN issued a proposal to demand duty on the quantity of molasses captively used in the production of rectified spirit from July 2012 to March 2013 which was confirmed by the original authority.
Sri M.N. Bharathi appeared for the appellant and submitted that the very same came up for consideration before the Tribunal and vide Final Order No.40612 dt. 26.07.2023, the Tribunal set aside the demand and allowed the appeal. Sri R. Rajaraman appeared for the Department and supported the findings in the impugned order.
The Tribunal in the case of Shree Ambika Sugars Ltd. held that “the denial of exemption notification 67/95 on molasses captively consumed to manufacture Rectified Spirit & DNA cannot be justified.”
there is no dispute that before 28-2-2005, Rectified Spirit and ENA manufactured by the appellant were covered under subheading No. 2204.90, NIL rate of duty. After the amendment of the Tariff (8 Digit Classification Code), Heading 22.04 would correspond to Heading No. 22.07.
In the above Board Circular, it has been clarified that Notification No. 3/2005-C.E., dated 24-2-2005 was issued to preserve the existing duty rate. So, it was evident that the Rectified Spirit’s existing NIL rate of duty under sub-heading No. 2204.90 has been covered under Serial No. 14 of the Table appended to Notification 3/2005-C.E. (supra).
A perusal of the ‘Note’ appended below the Notification dated 24-22005 as well as the statement made by the Hon’ble Finance Minister in Parliament, as referred to above, clearly establishes that the notification has taken care of the technical changes adopted in the numbering scheme of 6 digits Central Excise classification, which has been aligned with the Customs Tariff of 8 digits with effect from 28-2-2005.
In the case of Niphad Sakhar Karkhana Ltd. v. CCE – 2014 (300) E.L.T. 66 (Bom.). it was held that “after re-structuring of Central Excise Tariff from 6 Digit to 8 Digit with effect from 1-3-2005, Rectified Spirit and ENA are exempted by Notification No. 3/2005-C.E. and the appellant discharged the obligations under Rule 6 of the Cenvat Credit Rules, 2004 in respect of clearance of Rectified Spirit and ENA and therefore, denial of exemption Notification No. 67/95-C.E. (supra) on Molasses captively consumed in Rectified Spirit and ENA cannot be sustained. Accordingly, denial of Cenvat credit on the Molasses purchased from other sugar mills used in the manufacture of Rectified Spirit and ENA is also liable to be set aside. We have also noted that inputs and input service are not exclusively used for the generation of electricity and therefore, Cenvat credit cannot be denied.”
A two-member bench comprising Ms Sulekha Beevi C.S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member(Technical) in light of the judgement held set aside the impugned order and allowed the Appeal.
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