Whether mixing of denatured elements in rectified spirit amounts to manufacture?

PJ/CASE LAW/2015-16/2935

Case:-COMMR. OF CUS., C. EX. & S.T., BELGAUM VERSUS VISHWANATH SUGARS LTD.

Citation:- 2015 (325) E.L.T. 588 (Kar.)

Brief Facts:-This appeal is by the Commissioner of Customs, Central Excise and Service Tax questioning the order of the Appellate Tribunal in No. Excise 574/2005, dated 3-8-2009 [2010 (250) E.L.T. 390 (Tri. - Bang.)] reversing the Order-in-Original No. 12/2005, dated 22-3-2005.The respondent-assessee had availed the benefit under Cenvat credit for Rs. 2,28,85,316/- for the year 2001-02 under Rule 12 of the Cenvat Credit Rules read with 11A of the Central Excise Act, 1944. The Original Authority disputed the manufacturing process of Denatured Ethyl Alcohol, on the ground that the assessee all along manufactured only the rectified spirit. The assessee has not manufactured Denatured Ethyl Alcohol in the distillery. The Denatured Ethyl Alcohol was not manufactured in the assessee’s distillery and same is converted merely by manual adding denatured elements, that process of mixing of the denatured elements in rectified spirit is actually done in the tanker and hence the assessee cannot be treated as engaged in the manufacturing of Denatured Ethyl Alcohol.
The Original Authority by its order in original dated 23-3-2005 held that the assessee is not entitled for Cenvat Credit Scheme and he is liable to pay the balance credit of Rs. 83,56,155/-, which benefit he had availed on the basis that he had manufactured the Denatured Ethyl Alcohol in the distillery. On the basis of the same, a show cause notice was issued to the assessee dated 25-10-2004 and demand was confirmed.
The assessee who was aggrieved by the Original Order, filed an appeal before the Customs, Excise & Service Tax Appellate Tribunal in Appeal No. Excise/574/2005.

Reasoning Of Judgement:-The Appellate Tribunal found that the manufacturing Denatured Ethyl Alcohol was done by mixing the toxin. This process amounts to manufacturing of Denatured Ethyl Alcohol. However, the assessee’s case is that the toxin is mixed in the tank and during transportation the process of manufacturing gets completed. This process is accepted earlier, and it is a accepted practice. Till 2002, the benefit under the Cenvat Scheme is granted. Accordingly the assessee has followed the procedure applicable to the manufacturer and has been availing the Cenvat credit. It is not in dispute that what is produced is the Denatured Ethyl Alcohol. It is also not in dispute that the toxin was mixed up with Ethyl Alcohol in the tanker and the process of manufacturing was complete. The dispute with regard to whether it was done within the distillery or not. But there is no evidence to show that the mixing is done outside the distillery. The learned counsel for the appellant failed to show that the manufacturing process was outside the distillery and in fact in the original assessment it is stated that the toxin was mixed up with Ethyl Alcohol in the tanker and in the process of transportation it has become Denatured Ethyl Alcohol. Hence it is shown that Denatured Ethyl Alcohol is manufactured, as such the said manufactured product is exempted under the Cenvat Scheme, which benefit has been availed by the assessee and said practice was accepted by the authority and the benefit had been extended. They do not find any error in the order of Appellate Tribunal. Hence there is no merit in the appeal. Accordingly the appeal is dismissed.

Decision:-Appeal dismissed.

Comment:- The crux of the case is that the manual mixing of denatured toxin in Ethyl Alcohol in tankers would amounts to manufacture of Denatured Ethyl Alcohol, as process of manufacture is completed with this mixtureduring transportation only and as in the given case no evidence has been produced regarding the fact that the mixing was done outside factory/distillery. Therefore the said activity was treated as to be produced within the distillery and amounts to manufacture u/s 2(f) of Central excise act and henceforth the assessee is eligible to avail the cenvat credit.

Prepared By:- Neelam Jain

Comments

PJ/CASE LAW/2015-16/2935

Post a Comment

Query