The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the molasses used in the production of rectified spirit falls under ‘final product’ and was eligible to avail of CENVAT Credit of Customs duty.
EID Parry (India) Ltd, the appellant assessee was engaged in the manufacture of Denatured Ethyl Alcohol of and Rectified Spirit, Extra Natural Alcohol, Anhydrous Alcohol, Impure Spirit, etc. using molasses procured from their sister units in Pudukottai, Nellikuppam and Pugalur and the assessee availed CENVAT credit of the duty paid on molasses procured from the sister units.
The assessee appealed against the order passed by the Commissioner for confirming the penalty and interest imposed for availing of input credit of the duty paid on molasses used in the production of Rectified Spirit.
S. Muthuvenkatraman, the counsel for the assessee contended that rectified spirit was a manufactured product and excise duty was leviable on excisable goods manufactured in India under sec 3 of the Central Excise Act 1944.
Further submitted that Rectified Spirit can be considered as Final Product for central excise and consequently and the assessee was eligible for input credit on the molasses used in its production subject to compliance of rule 6 CENVAT Credit Rules, 2004.
M. Ambe, the counsel for the department relied on the decisions made by the lower authorities and contended that Rectified Spirit was capable of being made fit for human consumption, denatured Alcohol was not. Therefore, the legislature in adopting the revised central tariff heading has deliberately excluded even such products that had the potential to be used for human consumption.
The Bench observed that the rectified spirit arising in the course of the manufacture of sugar can be considered as excisable goods and whether input credit on molasses used in the manufacture can be availed under CENVAT credit rules.
The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) quashed the penalty along with interest while allowing the appeal filed by the assessee.
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