SAKTHI SUGARS LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE subject appeal seeks to vacate the demand of duty and cess to the tune of Rs. 2,38,45,050/ -, interest thereon and penalty equal to the duty amount imposed on the appellants M/s. Sakthi Sugars Limited (SSL for short). The facts of the case are that SSL manufactures sugar, molasses and rectified spirit (Ethyl Alcohol). The assessee clears rectified spirit as such and as denatured spirit. Whereas the rectified spirit is exempted from payment of duty, denatured spirit is subject to excise duty. Molasses which is a by -product emerging in the manufacture of sugar is captively consumed to produce rectified spirit. The assessee availed exemption under Notification No. 67/95 dated 16.3.95 on molasses used in the manufacture of rectified spirit during the period 1.3.2005 to 31.7.2005. Notification No. 67/95 -CE is applicable to a commodity subject to the condition that the final products manufactured with the said goods are not exempt from excise duty or are not chargeable to "nil" rate of duty. The exemption is available to inputs used in the manufacture of dutiable and exempted final products after the assessee had discharged the obligation prescribed in Rule 6 of the Cenvat Credit Rules, 2002 (CCR). In the instant case, the assessee had not maintained separate accounts of receipt, issue and inventory of the inputs that went into the manufacture of the exempted and duty paid rectified spirit. Nor did they pay an amount equal to 10% of the sale price of exempted rectified spirit as required in Rule 6 of Cenvat Credit Rules, 2002. The Commissioner concluded that SSL had willfully made misstatements and avoided payment of duty on molasses. Accordingly, he passed the impugned order demanding duty on the molasses consumed in the manufacture of rectified spirit during the period 1.3.2005 to 31.7.2005.

(2.) AT the time of hearing, the ld. Sr. Counsel appearing on behalf of SSL submitted that in order to avail the exemption in terms of Notification No. 67/95 dated 16.3.95 where the final products were cleared on payment of duty as well as under exemption, the assessee was required to discharge certain obligations as prescribed in Rule 6 of CCR, 2002. As per Sub -rule (3)(a)(i) of Rule 6 of Cenvat Credit Rules, 2002, if the manufacturer did not maintain separate accounts of receipt, issue and inventory of inputs going into the manufacture of dutiable and exempted final products, he should pay an amount equivalent to the cenvat credit taken on the inputs used in the manufacture of the final products if such final products fell under Heading No. 22.04 of the I Schedule to the CETA 1985. In the instant case the final products were rectified spirit (Ethyl Alcohol) of Heading No. 22.04 of the CET. The ld. Counsel submitted that the appellants had reversed input credit availed during the material period to the tune of Rs. 6,71,555/ - and produced certificate to that effect obtained from the jurisdictional range Superintendent. He claimed that in view of the reversal of input credit, the assessee was eligible for the exemption sought to be recovered and the impugned order was hence liable to be set aside.

(3.) LD . SDR justified the impugned order and. reiterated the reasoning followed by the Commissioner. We have carefully considered the case records and the rival submissions. We find that disposing a couple of appeals involving similar facts the Bangalore Bench of the Tribunal in para 7.2 of its Final Order No. 56 to 59/07 dated 30.11.06 made the following observations: