The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that molasses captively consumed in the manufacture of alcohol for human consumption is not subject to central excise duty.
The appellants, M/s NSL Sugars Limited, are engaged in the manufacture of sugar and in the course of manufacture of sugar, molasses emerges as a byproduct. Molasses is captively consumed in the manufacture of dutiable products like Ethyl Alcohol, Ethanol, denatured spirit and exempted products like rectified spirit etc. In the course of the manufacture of rectified spirit, carbon dioxide also emerges which is also liable to duty.
The appellants were availing the benefit of Notification No.67/95-CE dated 13.06.1995 as amended, which grants exemption from payment of duty on intermediary products, which are captively consumed in the manufacture of excisable goods. However, alleging that the appellant is manufacturing rectified spirit and Extra Neutral Alcohol by using molasses, which are exempted from payment of duty, thus the appellant is not eligible for the exemption in terms of the Notification No.67/95 dated 16.03.1995, proceedings were initiated.
The appellant in the present appeal filed miscellaneous applications for bunching and early disposal of the appeals on the ground that the issue is covered and the appeal is regarding denial of Notification No.67/95-CE dated 16.03.1995 as amended in respect of molasses manufactured and captively consumed for the manufacture of ‘neutral alcohol’, ‘rectified spirit’ which is not appearing in the first schedule to Central Excise Tariff Act, 1985.
The appellant submitted that they are following the provisions of Rule 6 of Cenvat Credit Rules, 2004 by reversing the attributable credit of duty availed on the chemicals and other inputs along with duty of credit availed on various input services used in the manufacture of ‘Molasses’, which is incidentally a by-product of ‘Sugar’. The appellant has placed statement showing the details of such reversals, which will clearly indicate that there is no ambiguity in the said reversals.
The Departmental Representative relied on the findings in the impugned order.
A Two-Member Bench comprising PA Augustian, Judicial Member and Pullela Nageswara Rao, Technical Member relied mainly on the decision in Kothari Sugars & Chemicals Ltd. Vs. Comm. of C.Ex., Trichy, wherein it was observed that “The excisable goods are defined in the Central Excise Act, 1944 as goods specified in the tariff schedule as being subject to a duty of excise. Since undenatured ethyl alcohol is outside the purview of the central levy, it is not subject to a duty of excise under the Central Excise Act, 1944 and hence, not excisable. As a corollary, the same cannot be treated as either exempted goods or chargeable to nil rate of duty.”
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