Custom, Excise & Service Tax Tribunal
Rajshree Sugars And Chemicals Ltd vs Commissioner Of Central Excise, ... on 20 November, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/S/41406/2014 & E/41188/2014
(Arising out of Order-in-Original No. 24/2014 (C) dated 28.2.2014 passed by the Commissioner of Central Excise, Puducherry)
Rajshree Sugars and Chemicals Ltd. Appellant
Vs.
Commissioner of Central Excise, Puducherry Respondent
E/S/41992/2014 and E/41707/2014
(Arising out of Order-in-Original No. LTUC/149/2014-C dated 4.6.2014 passed by the Commissioner of Central Excise, LTU, Chennai)
EID Parry India Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/19/2010
(Arising out of Order-in-Original No. LTUC/338/2009-C dated 23.11.2009 passed by the Commissioner of Central Excise, LTU, Chennai)
EID Parry India Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/308/2012
(Arising out of Order-in-Original No. LTUC/65/2012-C dated 13.2.2012 passed by the Commissioner of Central Excise, LTU, Chennai)
EID Parry India Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/413/2012
(Arising out of Order-in-Original No. 6/COMMR/CE/2012 dated 24.5.2012 passed by the Commissioner of Central Excise, Tirunelveli)
Dharani Sugars & Chemicals Ltd. Appellant
Vs.
CCE, Tirunelveli Respondent
E/468/2012
(Arising out of Order-in-Original No. LTUC/257/2012-C dated 23.8.2012 passed by the Commissioner of Central Excise, LTU, Chennai)
EID Parry India Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/41192/2013
(Arising out of Order-in-Original No. LTUC/55/2013-C dated 6.3.2013 passed by the Commissioner of Central Excise, LTU, Chennai)
EID Parry India Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/41249/2013
(Arising out of Order-in-Original No. 4/CE/COMMR/2013 dated 15.3.2013 passed by the Commissioner of Central Excise, Tirunelveli)
Dharani Sugars & Chemicals Ltd. Appellant
Vs.
Commissioner of Central Excise, Tirunelveli Respondent
E/40239/2014
(Arising out of Order-in-Original No. LTUC/426/2013-C dated 13.11.2013 passed by the Commissioner of Central Excise, LTU, Chennai)
Shree Ambika Sugars Ltd. Appellant
Vs.
Commissioner, LTU, Chennai Respondent
E/40474/2014
(Arising out of Order-in-Appeal No. 243/2013 dated 10.12.2013 passed by the Commissioner of Central Excise (Appeals), Madurai)
Rajshree Sugars & Chemicals Ltd. Appellant
Vs.
CCE, Madurai Respondent
E/41181/2014
(Arising out of Order-in-Original No.29/2014 (C) dated 18.3.2014 passed by the Commissioner of Central Excise, Puducherry)
Dharani Sugars & Chemicals Ltd. Appellant
Vs.
Commissioner of Central Excise, Puducherry Respondent
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
Appearance
Shri S. Muthuvenkataraman, Advocate, for the Appellants
Shri Parmod Kumar, JC (AR),
Shri M. Rammohan Rao, DC (AR) and
Shri K.P. Muralidharan, AC (AR) for the Respondents
CORAM
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
Date of Hearing: 31.10.2014
Date of Pronouncement: 20.11.2014
Final Order No. 40789 to 40799/2014
Per P.K. Das
A common issue is involved in these appeals and therefore, all are taken up together for disposal. After disposing of the stay applications filed in Appeal Nos. E/41188/2014, E/41707/2014 and E/41181/2014, we proceed to dispose of all the appeals.
2. The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of Sugar, Molasses in the sugar plant, Electricity in the co-generation plant and Ethyl Alcohol in the form of Rectified Spirit, Extra Neutral Alcohol and denatured ethanol etc, in the distillery plant. All are situated within the same premises. The appellants are procuring sugarcane and after various process namely, milling, juicing, evaporation, crystallization etc., sugar is manufactured. The appellant availed CENVAT credit on inputs, capital goods etc. During the process of manufacture of sugar, molasses emerges as a by-product. Sugar and Molasses are classifiable under sub-heading No. 1701 11 90 and 1703 1000 of CETA attracting central excise duty. Some of the appellants are also procuring Molasses from other sugar mill, on payment of central excise duty and availed CENVAT credit. The molasses is processed in the distillery plant. After fermentation, etc. various products are generated, which are dutiable and exempted final products. The dutiable goods are Carbon-di-oxide, Denatured spirit, Denatured Impure Spirit and Denatured Ethanol. They are also clearing exempted final products, namely - Rectified Spirit and Extra Neutral Alcohol (ENA). All these final products are arising out of processing of molasses. The appellants claimed the benefit of exemption Notification No.67/95-CE dated 16.3.1995 in respect of clearance of the molasses captively used in the manufacture of various dutiable and exempted final products. The appellants observed the procedure under Rule 6(3)(i) & (ii) of CENVAT Credit Rules, 2004 insofar as they paid the amount of 6% / 10% of value of exempted goods at the time of clearance from factory goods.
3. Revenue is of the view that after re-structuring of Central Excise Tariff from 6 Digit to 8 Digit with effect from 1.3.2005, the un-denatured Ethyl Alcohol removed was removed from 8 Digit Central Excise Tariff and Sub-heading 2207 2000 carries only spirits and Ethyl Alcohol denatured of any strength. According to Revenue, Rectified Spirit and ENA are non-excisable goods with effect from 1.3.2005 and therefore, the appellants are not eligible to avail benefit of exemption Notification No. 67/95-CE (supra) on Molasses captively used in the manufacture of Rectified Spirit and ENA.
4. Show Cause Notices were issued proposing to deny the benefit of exemption notification No. 67/95-CE dated 16.3.1995 on molasses manufactured and cleared for captive consumption in the manufacture of Rectified Spirit, Extra Neutral Alcohol (ENA), Neutral Alcohol (NA) etc. are in the form of Undenatured Ethyl Alcohol and are not specified in the First Schedule to the Central Excise Tariff Act, 1985. It has also proposed to recover CENVAT credit availed on Molasses received from other sugar mills. The adjudicating authority confirmed the demand of duty on the molasses captively consumed in the manufacture of Rectified Spirit and ENA, denying the benefit of Notification No.67/95-CE (supra) and also demanded the CENVAT credit availed on the molasses purchased from outside, during the period from 2006 07 till 2013 14, along with interest and penalty.
5. In all the appeals, duty has been demanded denying the benefit of Notification No.67/95-CE (supra). In the appeals of M/s. Dharani Sugars and Rajshree Sugars and Chemicals Ltd., there is another issue of denial of CENVAT credit on the molasses purchased from outside. In the appeal of Dharani Sugars (E/413/2012) there is denial of CENVAT credit on inputs, input services which have been used in the generation of electricity and capital goods, used in the distillery for manufacture of both dutiable and exempted products.
6. The learned counsel for the Appellants drew the attention of the Bench to the Legislative changes of Chapter 22 of the CETA, 1985 from time to time. He submits that the Rectified Spirit and ENA were classified under sub-heading 2204 90, prior to 1.3.2005, NIL duty. There is no dispute that Molasses were used in the manufacture of Rectified Spirit amongst others. The other products were cleared on payment of duty. After re-structuring of Tariff with effect from 1.3.2005, Rectified Spirit, Extra Neutral Alcohol etc. were cleared without payment of duty, as exempted by Notification No.3/2005-CE dated 24.2.2005 and Notification No.12/2012 dated 17.3.2012.
6.1 They have paid amount 5% / 6% / 8%, of the value of exempted goods during the period in dispute, as per Rule 6 of the CENVAT Credit Rules in respect of clearance of Rectified spirit and Extra Neutral Alcohol. Clause (vi) of the proviso to Notification No.67/95-CE (supra), provides that nothing contained in the Notification shall apply to the duty paid inputs used in relation to manufacture of dutiable and exempted goods where the manufacturer discharged the obligation prescribed under Rule 6 of CENVAT Credit Rules, 2004.
6.2 The adjudicating authority denied the benefit of Notification No.67/95 on the molasses on the ground that after the restructuring of Tariff, the Rectified Spirit and ENA were not mentioned in the Tariff. It is contended that the Honble High Courts and the Tribunals have consistently viewed that after restructuring, no item was excluded from the Tariff. In support of his contention, he referred the written submissions filed before the Tribunal.
6.3 The following decisions are relied upon:-
(a) Gularia Chini Mills Vs. Union of India 2014 (34) STR 175 (All.)
(b) Ugar Sugar Works Ltd. Vs. CCE 2007 (214) ELT 33
(c) Ugar Sugar Works Ltd. Vs. CCE 2008 (232) ELT 81
(d) CCE Vs. M/s. Bazpur Cooperative Sugar Factory Ltd. 2014-TIOL-1733-HC-UKHAD-CX
(e) Synthetics & Chemicals Ltd. Etc vs State Of U.P. And Ors. AIR 1990 SC 1927, at para 73.
6.4 He also relied on the Boards Circular No. 808/5/2005-CX dated 25.2.2005. Rectified Spirit and ENA are covered under sub-heading 2207 20 00 after restructuring of the Tariff. There is no dispute that Rectified Spirit and ENA are not fit for human consumption and therefore as per Chapter Note 4, Chapter 22, it will be covered under Chapter 22. Prior to restructuring, Note 1 of Chapter 22 excluded alcoholic liquor fit for human consumption.
6.5 He also relied upon Rule 4 of the Interpretative Rules to HSN (Harmonized System Nomenclature) to substantiate that even if Rectified spirit is not specifically mentioned in the Tariff, it is akin to the description of the Tariff Entry in 2207 2000 which reads as Ethyl Alcohol and other spirits.
6.6 Regarding the denial of CENVAT credit on the molasses purchased from outside, he submits that the molasses used in the processing of Rectified Spirit and ENA, the appellant discharged the obligation under Rule 6 of the CENVAT Credit Rules and therefore, there is no scope for denial of CENVAT credit.
6.7 To sum up, Rectified spirit and ENA are excisable and covered by the exemption Notification. Regarding the denial of CENVAT credit on input services and capital goods on generation of electricity, he submits that these were not exclusively used in the exempted goods and there is no reason for denial of CENVAT credit.
7. On the other hand, the learned Authorized Representative for the Revenue reiterates the findings of the authorities below. He drew the attention of the Bench to Heading 2207 2000 after restructuring of the Tariff. It is submitted that Rectified spirit and ENA do not find mention anywhere in the Tariff description.
7.1 Rectified spirit and ENA, prior to restructuring of the Tariff on 28.2.2005, were attracting nil rate of duty under sub-heading 2204 90 of the CETA. But, after restructuring, these items are not mentioned in the CETA and therefore it will be treated as non-excisable. After restructuring of the Tariff in line with the Customs Tariff Act, denatured ethyl alcohol is classified under 2207 2000 of CETA and heading 2207 10 has been left blank.
7.2 Sub-heading 2207 2000 covers all spirits which are Denatured and undenatured spirits are not covered under the said Heading.
7.3 Rectified spirit is fit for human consumption as per Rule 48 of the Tamil Nadu Distillery Rules, 1981. He also relied on certain extracts of Wikipedia in his compilation to substantiate his point that Rectified spirit is fit for human consumption.
7.4 Regarding the claim of the appellant with regard to the benefit of the exemption Notification, he submits that the exemption would be applicable only to all spirits which are denatured other than Ethyl Alcohol and are covered under the Tariff item 2207 2000. He relied upon the decision of the Tribunal in the case of Commissioner of Customs Vs. Microqual Techno Pvt. Ltd. 2011 (274) ELT 289 to support that the benefit of the Notification would be applicable when the item is covered under the Tariff description. None of the decisions cited by the learned counsel are on the issue of classification or excisability of the impugned products after restructuring of the Tariff. He relied upon the following decisions:-
(a) Kothari Sugars & Chemicals Ltd. Vs. CCE, Trichy 2010 (262) ELT 545
(b) Venkateshwara Winery & Distillery Ltd. Vs. CCE, Hyderabad 2013 (295) ELT 306
7.5 He also relied upon the statement of Shri Vedanayagam, Deputy General Manager, referred in Appeal No. E/41181/2014 in the case of Dharani Sugars & Chemicals recorded on 27.2.2013 to substantiate that it is under the control of State Excise authority. Rectified spirit is denatured only for the purpose of avoiding misuse of alcohol for human consumption.
7.6 Regarding Notification No. 67/95, he submits that the Table appended to Notification covered CENVAT Credit Rules, 2001 and not Rules, 2004. He relied upon the decision of the Honble Supreme Court in the case of Novopan India Ltd. Vs. CCE 1994 (73) ELT 769 (SC) and CCE Vs. Sunder Steels Ltd. 2005 (181) ELT 154 (SC).
7.7 Regarding the denial of CENVAT credit, as per Rule 2(h) of the CENVAT Credit Rules, 2004, Rectified spirit would not be treated as excisable goods and therefore the eligibility of CENVAT credit does not arise.
8. After hearing both sides and on perusal of the records, we find that the main issue involved in these appeals is whether after re-structuring of Central Excise Tariff with effect from 1.3.2005, Rectified Spirit and ENA would be treated as exempted final product under Notification 3/2005-CE dated 17.3.2005 and Molasses captively consumed in the manufacture of varieties of undenatured Ethyl Alcohol such as Rectified spirit, Extra Neutral alcohol etc. are eligible for exemption benefit under Notification No. 67/95-CE dated 16.3.1995 as amended from time to time.
8.1 For the proper appreciation of the case, we take up the facts from Appeal No. E/41188/2014 in the case of M/s. Rajshree Sugars and Chemicals Ltd. Vs. CCE, Puducherry. The adjudicating authority observed that Denatured Ethyl Alcohol were dutiable and removed from the factory on payment of appropriate excise duty and the non-excisable goods i.e. varieties of Denatured Ethyl Alcohol including Rectified spirit were removed on payment of an amount equivalent to 6%, on the invoice value in terms of Rule 6 of the CENVAT Credit Rules, 2004. Ethyl Alcohol mainly has an intoxicating agent in alcohol-based liquor for human consumption. Prior to 1.3.2005 of Tariff restructuring from 6 digit to 8 digit Heading No. 2204.90 of the CETA covers Rectified Spirit and ENA, NIL rate of duty. The appellants were eligible to avail the CENVAT credit on the molasses captively used in the manufacture of dutiable and exempted products. The appellants reversed the amount under Rule 6 of the CENVAT Credit Rules, 2004 at the time of clearance of the exempted Denatured Ethyl Alcohol including Rectified spirit. According to Revenue, after restructuring of the Tariff from 6 digit to 8 digit, Denatured Ethyl Alcohol would become non-excisable and therefore the appellants are not eligible to avail the benefit of the exemption Notification No. 67/95-CE (supra) in respect of molasses used in the manufacture of Denatured Ethyl Alcohol including Rectified spirit.
8.2 It is appropriate to look into the changes of Chapter 22 and the Notification as under:-
(I) As on 1st March, 1994, Chapter 22 covers beverages, vinegar and spirit. Note to Chapter 22 states that this Chapter does not cover alcoholic liquors for human consumption. The Tariff description of Heading No. 22.04 is reproduced below:-
Heading No.
Sub-heading
Description of goods
(1)
(2)
(3)
22.04
2204.00
Ethyl Alcohol of any strength whether denatured or not, but not including alcoholic liquor for human consumption
Rectified Spirit and ENA are not fit for human consumption and covered by exemption Notification No. 2/94-CE dated 1.3.1994 (Sl. No. 32 of the Table) exempted all goods, other than Ethyl Alcohol of any strength, denatured under sub-heading 2204.00 nil rate of duty.
(II) Prior to 1.3.2005, Note 1 of Chapter 22 provides that this Chapter does not cover alcoholic liquors for human consumption. The relevant portion of Heading No. 22.04 is reproduced below:-
Heading No.
Sub-heading
Description of goods
(1)
(2)
(3)
22.04
2204.10
2204.90
Ethyl Alcohol of any strength whether denatured or not, but not including alcoholic liquor for human consumption
- Denatured ethyl alcohol of any strength
- Other NIL
Rectified Spirit and ENA covered under Sub-heading No. 2204.90, NIL duty.
(III) After re-structuring of Tariff from 6 digit to 8 digit, with effect from 1.3.2005, Note 4 of Chapter 22 states that this Chapter does not cover alcoholic liquor for human consumption. Heading No. 2204 is shown as blank. Heading 2207 covers ethyl alcohol and other spirits, denatured of any strength. The relevant portion of Heading 2207 is reproduced below:-
Heading No.
Description of goods
Rate of Duty
(1)
(3)
(4)
2207
2207 10
2207 10 11
2207 10 19
2207 10 90
2207 20 00
Ethyl alcohol and other spirits, denatured, of any strength
-
---
----
----
---
- Ethyl alcohol and other spirits, denatured, of any strength 12% (IV) Notification No. 3/2005-CE dated 24.2.2005 (Serial No. 14 of the Table) all spirits (other than denatured ethyl alcohol of any strength) under sub-heading No. 2207 20 00 extended nil rate of duty.
(V) Notification No. 3/2005-CE dated 24.2.2005 was superseded by Notification No. 12/2012-CE dated 17.3.2012. Sl. No. 40 of the Table appended to Notification No. 12/2012 all spirits (other than denatured ethyl alcohol of any strength) under sub-heading 2207 20 00, extended nil rate of duty.
(VI) In the present case, the issue involved is eligibility of Notification No. 67/95-CE (supra), which is as under:-
In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1994) read with sub-section (3) of section3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), (hereinafter referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts
(i) capital goods as defined in the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production;
(ii) goods specified in column (1) of the Table hereto annexed (hereinafter referred to as inputs) manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products specified in column (2) of the said Table;
From the whole of the duty of excise leviable thereon which is specified in the Schedules to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act.
Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared
(i) xxxx xxxxx xxxxx xxxxx
(ii) xxxx xxxxx xxxxx xxxxx
(vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules, 2001.
Explanation ************* TABLE Description of Inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) other than (light diesel oil, high speed diesel oil) and motor spirit, commonly known as petrol.
All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than matches 8.3 We find that the present dispute is emerged due to restructuring of the Tariff from 6 digit to 8 digit. CBEC vide Circular No. 808/5/2005-CX dated 25.2.2005 regarding implementation of Tariff from 6 Digit to 8 Digit, clarified as under:-
Implementation of the Central Excise Tariff (Amendment) Act, 2004 (8- Digit Classification Code)- Clarification regarding.
I am directed to draw your attention to this Departments Notification No.6/2005-CE (NT) dated 24.2.2005, issued from F.No.4/3/2002-CX.I (Part-II), which notifies that the Central Excise Tariff (Amendment) Act, 2004 will come into force with effect from 28th February 2005. The said Act is being uploaded on the CBEC website, (www.cbec.gov.in).
2. Accordingly, all the field officers must ensure implementation of the amended Tariff Act (including 8-digit classification code in its new 1st & 2nd Schedules) from 28.02.2005. Trade should also be suitably informed immediately and guided in the matter so that the transition from 6-digit to 8-digit classification code is smooth without any difficulty to the trade in day-to-day clearances.
3. Notification No. 3/2005-CE dated 24th February 2005 has been issued to preserve the existing duty rates on specified commodities where effective rates were built into the six-digit tariff, but are now subject to different tariff rates in the 8-digit code. This is subject to any subsequent changes.
8.4 In the present case, there is no dispute that prior to 28.2.2005, Rectified Spirit and ENA manufactured by the appellant were covered under sub-heading No. 2204.90, NIL rate of duty. After amendment of 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-CE dated 24.2.2005 was issued to preserve the existing duty rate. So, it is clearly evident that the Rectified Spirit 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-CE (supra). In view of the above Board Circular, we find merit in the submission of the learned Advocate that with effect from 28.2.2005, Rectified Spirit and ENA are exempted goods, covered under Notification No.3/2005-CE. The Honble Allahabad High Court in the case of Gularia Chini Mills Vs. Union of India 2014 (34) STR 175 (All.) while dealing with bagasse, which emerged as a residue of sugarcane used as fuel in factory for manufacture of final product would be treated as exempted goods in the context of restructuring of Tariff of 6 digit to 8 digit, observed as under:-
30.?It is relevant to mention here that a notification, bearing No. 7/2005-Central Excise (N.T.) was published in Part II, Section 3, sub-section (I) of the Gazette of India, Extraordinary, dated 24-2-2005, which reads as under :
In exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules to amend all the rules made under the said section and all the notifications issued under the said rules and for the time being in force on the date of commencement of the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), except as respects things done or omitted to be done before such amendments, namely:-
1.(1) These rules may be called the Central Excise Removal of Difficulties) Rules, 2005 (2) They shall come into force on the date of the commencement of the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005).
2. In each of the rules made under Section 37 of the Central Excise Act, 1944 (1 of 1944), and in each of the notifications issued under these rules, for any reference to the Chapter, heading or sub-heading of the First Schedule or the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as the case may be, relating to any goods or class of goods, wherever referred to in the said rules or notifications, the corresponding reference to the Chapter, heading or sub-heading or tariff item, of the First Schedule or the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005) shall be deemed to have been substituted.
No. 4/3/2002-CX.I (Pt.II) Abhay Kumar Srivastav Deputy Secretary to the Government of India Note : This notification intends to take care of the technical changes adopted in the numbering scheme for Central Excise classification through the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005). These amendments do not involve any substantive changes in the existing rules, so the particulars of each rule have not been indicated. Furthermore, during debate in Lok Sabha on the said Central Excise Tariff (Amendment) Bill, 2004, the then Honble Minister of Finance in regard to the purpose of introduction of eight digit classification has stated that the purpose of the Bill is very limited. On the custom side, we already have an eight-digit classification. It is, therefore, necessary that on the Excise side also we have the same eight digit classification. What we have found is that eight digit classification helps both trade and revenue department to identify a particular product and heading under which it falls. Immediately, the number of disputes comes down very sharply.....
31.?A perusal of the Note appended below the Notification dated 24-2-2005 as well as the statement made by the Honble 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.
32.?The definition of excisable goods given in Section 2(d) means the goods, which are specified in the First or Second Schedule and which are subjected to duty of excise, can only be treated as excisable goods. A proposition has also been accepted by the Commissioner in its findings. A perusal of Section 2(d) of Central Excise Act shows that the excisable goods are only those goods which are subjected to duty of excise as specified in the First Schedule or Second Schedule of the Central Excise Tariff Act. Since Column of rate of duty is blank, therefore, in view of Section 2 of the Central Excise Tariff Act, 1985, electrical energy is not being subjected to excise duty for the purposes of being excisable goods under Section 2(d) of the Central Excise Act. Furthermore, Rule 6 of the 2004 Rules, which is applicable only to excisable goods, can alone be treated as exempted goods for the purposes of Rule 6(3) of 2004 Rules, does not apply to electrical energy. 8.5 It is clear from the decision of the Honble Allahabad High Court in the case of Gularia Chini Mills (supra), that the restructuring of Tariff from 6 digit to 8 digit with effect from 1.3.2005 would not involve any substantive change in the existing rules. It was taken care of the technical changes adopted in the numbering scheme for central excise classification through the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005). From the Legislative changes of Chapter 22 as mentioned above, it is clear that Chapter 22 does not cover alcoholic liquor for human consumption. Department accepted that prior to 1.3.2005, Rectified spirit was nil rate of duty under sub-heading No. 2204.90. After the introduction of 8 digit classification with effect from 1.3.2005, Heading 2207 covers ethyl alcohol and other spirits, denature, of any strength. On perusal of the impugned order, we find that the appellant contended before the Adjudicating authority that Rectified Spirit with 95% strength was removed from the factory. It cannot be alcoholic liquor for human consumption. Both Rectified Spirit and Denatured Ethyl Alcohol are only varieties of Ethyl Alcohol and liquor for human consumption. As per Dictionary meaning, Rectified Spirit is distilled Ethanol with only 4.43% water and it is nothing but Ethyl Alcohol with highly concentrate Ethanol and cannot be fit for human consumption. Normally, Ethyl Alcohol are ranging from 10% to 40% in liquor. In any event, Rectified Spirit (95) is more akin to denatured Ethyl Alcohol and both are industrial alcohol falling under Heading No. 2207 of HSN. In this perspective, if we look into Notification No. 3/2005-CE (supra), as claimed by the appellants, the words all spirits in Serial No. 14 of the Table of the said Notification have wide amplitude and it includes irrespective of whether denatured or not. So, we are of the view that Rectified Spirit and ENA are covered by exemption Notification.
8.6 The Tribunal in the case of Ugar Sugar Works Vs. CCE 2007 (214) ELT 33 held that with effect from 1.3.2005, Rectified spirit along with denatured spirit would cover under sub-heading No. 2207 2000 and it cannot be said that with effect from 1.3.2005, it became non-excisable. The relevant portion of the said decision is reproduced below:-
4. The appellant? manufactures Sugar and Molasses. From the molasses, Rectified spirit is produced. Rectified spirit is denatured and de-natured spirit is also manufactured. The appellant takes Cenvat credit on the molasses used in the manufacture of Rectified Spirit/Denatured Spirit. It is the contention of the Revenue that w.e.f. 1-3-2005, Rectified Spirit has become non-excisable and, therefore, no Cenvat credit could have been availed by the appellant. Apart from molasses, furnace oil is also used in the manufacture of Rectified Spirit as a fuel. Therefore, Revenue is also aggrieved that the Cenvat credit availed on furnace oil is also not admissible. The appellant has contended that prior to 1-3-2005, Rectified Spirit was covered under Chapter sub-heading 2204.90 and Denatured Spirit was covered under CSH 2204.10. However, in the restructured Tariff, both Rectified Spirit and Denatured Spirit are covered under the same Chapter sub-heading 2207 20 00. Therefore, the contention that Rectified Spirit has become non-excisable w.e.f. 1-3-2005 is totally wrong. We find that even though the molasses is first converted to Rectified Spirit, while converting the same, Carbon Di-Oxide is first manufactured and the same is cleared on payment of duty. Further, part of the Rectified Spirit is converted into Denatured Spirit which is also sold on payment of duty. Therefore, it cannot be said that Molasses is used only in the manufacture of Rectified Spirit. In other words, Molasses is used as a common input in the manufacture of exempted Rectified Spirit as well as dutiable Carbon Di-Oxide and Denatured Spirit. Hence, in terms of Rule 6 of Cenvat Credit Rules, if the credit on molasses used in or in relation to the manufacture of the said Rectified Spirit is reversed, there is no violation of any provisions of law and the credit taken on Molasses cannot be denied. This issue is covered by the decision of this Bench in the case of NCS Distilleries/Estates Pvt. Ltd. v. CCE, Visakhapatnam - 2007 (207) E.L.T. 400 (Tri.-Bang.) and the Final Order Nos. 56 to 59/2007 dated 30-11-2006 [2007 (212) E.L.T. 234 (Tribunal)] in the case of The Godavari Sugar Mills Ltd. & Others v. CCE. It is on record that the appellants had reversed total Cenvat credit of Rs. 1,22,49,550/- attributable to the molasses used in or in relation to the manufacture of 3073155 ltrs. of Rectified Spirit cleared without payment of duty. 8.7 In the case of CCE Vs. M/s Bazpur Cooperative Sugar Factory Ltd. 2014-TIOL-1733-HC-UKHAD, the Honble Uttarkhad High Court held that Rectified spirit attracting nil rate of duty and waste/storage loss of Rectified Spirit, credit availed on duty paid on molasses is required to be reversed under Rule 6(1) of the CENVAT Credit Rules, 2004. In that case, while scrutinizing the return of the assessee for the month from July 2005 to March 2006, it was observed that the stock was short by 33172.80 bulk litres. It was shown as wastage. The Honble High Court in favour of the Revenue held that CENVAT credit attributable to the quantity of inputs (molasses) used in or in relation to the manufacture of the exempted final products (Rectified spirit), attracting nil rate of duty and which was reported as wastage/storage loss should be reversed as per provisions of Rule 6(3) of the CENVAT Credit Rules, 2004. In the case of Godavari Sugar Mills Ltd. Vs. CCE 2007 (212) ELT 234 it was held that molasses used for manufacture of Rectified spirit and denatured spirit, part of Rectified spirit converted into denatured spirit which is dutiable, benefit of Notification No. 67/95-CE is available provided the manufacturer discharges the obligation prescribed under Rule 6 of the CENVAT Credit Rules. In that case, it was observed that the Rectified spirit covers under Heading No.22.04 of the Tariff (presently 2207 2000).
8.8 The adjudicating authority observed that Section 2(d) of the Central Excise Act, 1944 defines excisable goods to refer only to those goods being leviable to central excise duty, denatured ethyl alcohol virtually changed into non-excisable goods since 1.3.2005. It has been observed that Note 4 of Chapter22 of the Tariff excludes liquor for human consumption. Rectified spirit and other varieties of denatured ethyl alcohol being only undiluted form of liquor for human consumption and usable for potable purposes are certainly excluded from the purview of Chapter 22 thereby do not remain as excisable goods. We find that in the present case, the stand taken by the Revenue that prior to 1.3.2005, Rectified spirit was not for human consumption and therefore it was classified under heading 2204 as nil rate of duty. So, after 1.3.2005, it cannot be said that it is fit for human consumption. It is further observed that the exemption Notification No. 3/2005-CE would be extendable only to Heading No. 2207 2000 denatured ethyl alcohol and other denatured spirits, of any strength. It has also observed that though the notification refers to all spirits would be read with reference to sub-heading No. 2207 2000. In our considered view, exemption Notification would be read independently. We have already discussed above that the expression all spirits has a wide meaning, irrespective of whether denatured or not. Taking into account of restructuring of the Tariff from 6 digit to 8 digit, we find that the position of sub-heading 2204.20 nil rate of duty is corresponding to Notification No. 3/2005. We have also noticed that the appellants discharged the obligation under Rule 6 of the CENVAT Credit Rules by paying 6% of the invoice value on the clearance of the Rectified spirit. Thus, the appellants are eligible to avail the benefit of Notification No. 67/95-CE dated 16.3.1995 in respect of molasses used in the manufacture of Rectified spirit and ENA.
8.9 The learned AR for Revenue relied upon the decision of the Honble Bombay High Court in the case of Niphad Sakhar Karkhana Ltd. Vs. CCE 2014 (300) ELT 66 (Bom.). In that case, the assessee filed appeal along with stay application before the Tribunal. By stay order, the Tribunal directed the assessee to predeposit a sum of Rs. One crore out of Rs.1.14 crores in accordance with the provisions of Section 35F of the Central Excise Act, 1944. The Honble High Court directed the Tribunal to decide the stay application afresh considering the decisions to take prima facie view whether they are applicable to the facts of the impugned case before directing predeposit. The learned AR also relied upon the decision of the Tribunal in the Ugar Sugar Works Ltd. (supra), which we have already discussed above. In the case of Kothari Sugars & Chemicals Ltd. Vs. CCE 2010 (262) ELT 545, the Tribunal remanded the matter. In the case of Venkateshwara Winery & Distillery Ltd. Vs. CCE 2013 (295) ELT 306, the Tribunal granted stay. In our considered view, none of the case laws relied upon by the learned AR are applicable in the facts and law of the case.
8.10 The learned AR referred Rule 48 of Tamilnadu Distillery Rules, 1985, Govt. of Tamilnadu, to establish that Rectified spirit is fit for human consumption. We find that the adjudicating authority accepted prior to 1.3.2005 Rectified Spirit covers under Sub-heading No. 22.04 which is not fit for consumption and we are unable to accept the submission fo the learned AR. It is noted that as regards Entry 84, List I, Seventh Schedule to the Constitution and other entries relating to alcohol it was only after the decision of the Honble Supreme Court in the case of Synthetics and Chemicals [1990 (1) SCC 109] on 25-10-1989 holding that industrial alcohol was outside the legislative competence of State Legislature, the constitutional position relating to excisability for purposes of Central Excise became clear. Tamilnadu Prohibition and Excise Manual, Govt. of Tamil Nadu stated that levy of Excise Duty and Vend Fee on Industrial Alcohol has been withdrawn by the Government by order No. MS No. 167 Home, Prohibition and Excise (III) Department dated 3rd February 1990 effective 25.10.1989, the date of order of Supreme Court in W.P. No. 18 etc. of 1980 holding that the State Government could not invoke Entry 8 List II, to levy Excise Duty and Vend Fee and the powers of State Government under Entry 8-List II is limited to regulating and the prevention of conversion of alcoholic liquors for industrial use to one for human consumption and hence presently no levy is in operation. The Government, consequent on the withdrawal on Excise Duty and Vend Fee, have by order, MS. No. 662 Home, Prohibition and Excise III Department dated 4.9.1992 prescribed the collection of an Administrative Service Fee of Rs.0.50 paise per bulk itre of spirit produced in the distillery before the spirit in issued from the distillery, to cover the service charges including expenditure on staff. The statements as referred by the learned AR are in this context.
8.11 The learned AR submits that the Table of the Notification No. 67/95 referred the CENVAT Credit Rules, 2001 and not Rules, 2004. In this case, we find that the adjudicating authority accepted that prior to 1.3.2005, the appellants are eligible for the benefit of exemption Notification No. 67/95 and therefore the submission of the learned AR for the Revenue has no merit. Apart from that, the Honble Supreme Court in the case of Vikram Cement Ltd. 2006 ELT 194) 3 (SC) held that the schemes of MODVAT and CENVAT credit are not different.
8.12 It is seen from the above, 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-CE (supra) 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-CE (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 mill used in the manufacture of Rectified Spirit and ENA are also liable to be set aside. We have also noted that inputs and input service are not exclusively used for generation of electricity and therefore CENVAT credit cannot be denied.
9. In view of the above discussion, we set aside all the impugned orders and allow the appeals with consequential relief, if any.
(Pronounced in open court on 20.11.2014 ) (R. PERIASAMI) (P.K. DAS) Technical Member Judicial Member Rex 29