Custom, Excise & Service Tax Tribunal
Dalmia Cement Bharat Ltd vs Commissioner-Ranchi Commissionerate on 14 October, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.75200 of 2020
(Arising out of Order-in-Original No.17/Central Excise/Pr.Commr./2019 dated
24.02.2020 Pr. Commissioner, CGST & CX, Ranchi.)
M/s. Dalmia Cement (Bharat) Ltd.
[Earlier known as Dalmia Cement (East) Ltd. & Bokaro Jaypee
Cement Plant]
(Plot No.IVA-7(P), Bokaro Industrial Area, Balidih, Bokaro Steel City-827014.)
...Appellant
VERSUS
Pr. Commissioner, CGST & CX, Ranchi
.....Respondent
(Central Revenue Building, 5A, Main Road, Ranchi-834001.) APPEARANCE Shri Rahul Tangri, Ms. Ekta Jhunjhunwala & Shri Vasudev A., all Advocates for the Appellant (s) Shri D. Sue, Authorized Representative for the Revenue CORAM: HON'BLE SHRI R. MURALIDHAR, MEMBER(JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) FINAL ORDER NO. 77584/2025 DATE OF HEARING : 14.10.2025 DATE OF DECISION : 14.10.2025 Per : R. MURALIDHAR :
Dalmia Cement (Bharat) Limited, is engaged in the manufacture of Cement falling under Chapter 25 of the First Schedule to the Central Excise Tariff Act, 1985 and was availing the Cenvat credit of duty paid on inputs, capital goods and inputs services used in the manufacture of final products as per Cenvat Credit Rules, 2004. During the period from F.Y. 2013-14 to 2016-17 ('relevant period'), the Appellant procured goods, viz. 'Slag', 'Gypsum' and 'Clinker' which 2 Excise Appeal No.75200 of 2020 are primarily raw materials for the manufacture of Cement, and availed Cenvat credit on the same. Further, the Appellant also availed Cenvat credit on 'Fuel Coal' procured for use in manufacturing of the final product, i.e. cement.
2. The Appellant receives the raw materials at the factory gate and the weight on receipt is ascertained wherein it is recorded in the books of account in the 'wet code'(raw material with moisture). The Appellant carries out the analysis of the raw materials so received to determine the moisture content in the same, if any. Subsequently, when the raw materials are taken out for use in the manufacturing process, the Appellant records the moisture content separately in the books of accounts, and the remaining amount is posted to 'dry code' (raw material without moisture). The same is only an accounting entry and there is no physical segregation of the moisture from the raw materials, and the entire materials which also contain the moisture content is used in the manufacturing process. In the month of February 2016, an audit was conducted by the CERA audit team in respect of the Applicant for FY 2014-15, wherein it was observed that the Appellant is not eligible to avail Cenvat credit to the tune of Rs. 56.22 lakhs on the allegation that the Appellant did not use a part of the raw materials by citing reasons of moisture loss / invisible loss, in the process of manufacture of finished goods, i.e. cement. The said audit observation culminated into issuance of the underlying SCN wherein a demand of Rs. 4,12,13,467/- was proposed citing non- utilization of a portion of inputs in the manufacturing process on account of moisture loss, thereby contravening Rule 2(k), Rule 3 and Rule 9(5) of the Cenvat Credit Rules, 2004. After due process, the Adjudicating authority confirmed the demand. Being aggrieved, the appellants have filed the present appeal before the Tribunal.
3. The Ld Counsel, appearing for the appellant makes the following submissions :
3Excise Appeal No.75200 of 2020 3.1 It is humbly submitted that as soon as the Appellant receives raw materials, it is recorded in the books of account which is the wet quantity (including moisture). The Appellant carries out testing of such raw materials to determine the percentage of moisture. Subsequently, when the raw materials are taken out for use in the production process, the moisture content and dry weight of raw materials are recorded separately in the books of accounts, although there is no physical separation of the same.
3.2 To summarize, the entire quantity of raw materials that is received, is actually used in the manufacturing process, however, merely for the purpose of accounting, the portion of moisture content in the raw materials is recorded as moisture loss in the books of accounts maintained by the Appellant.
3.3 In this regard, it is humbly submitted that the Department has denied the Cenvat Credit on the portion of such moisture loss without understanding the fact that such 'moisture loss' is merely an accounting entry and does not, in any way, represent the less usage of raw materials in the manufacturing process or loss of inputs prior to usage in their manufacturing process 3.4 Since the Appellant's manufacturing process is heat intensive, naturally the moisture content in the raw materials would get evaporated. However, the Appellant has paid duty on the entire wet quantity of raw materials and is duly eligible to avail the entire Cenvat credit, since such process loss is a part and parcel of the manufacturing process and it is a settled position of law that Cenvat credit cannot be denied on process loss, such as moisture loss, or shortages during transportation etc. 4 Excise Appeal No.75200 of 2020 3.5 The issue is no more res integra. In this regard, reliance is placed on the Larger Bench decision in the case of Commissioner of Central Excise, Nagpur v. Associated Cement Companies Limited - 2006 (197) E.L.T. 215 (Tri. - LB), wherein it was held that Modvat credit on inputs cannot be denied on loss of moisture content contained in the inputs owing to evaporation, whether such evaporation takes place in transit (while the inputs are transported to factory) or during manufacturing process.
3.6 Reliance is also placed on the decision of Hon'ble CESTAT Mumbai in the case of M/s. ACC Limited v. CCE, & ST, Mumbai -
Final Order No. A/85856/2023 dated 12.03.2023, wherein the assessee was also manufacturing cement, and recording moisture loss in respect of the raw materials viz. Slag, Clinker and Gypsum, during the time of storage and transportation. The Department sought to deny the Cenvat credit in respect of such moisture loss. However, the Hon'ble CESTAT Mumbai relying upon the larger bench decision in Associated Cement Companies Limited (supra) held that the assessee is entitled to avail full Cenvat Credit and no part can be disallowed on account of moisture loss. The said decision is also squarely applicable to the Appellant.
3.7 Reliance is also placed on the decision in the case of Union of India v. M/.s Hindustan Zinc Ltd. &Anr. - 2013 (3) TMI 114 - Rajasthan High Court wherein it was held that Cenvat credit cannot be denied on shortages arising inter alia on account of loss occurring due to evaporation of the moisture content more so when there is no observation of any theft or pilferage. Similar proposition was also upheld in the case of Lubrizol India Pvt. Ltd. v. Commissioner of Central Excise, Belapur - 2017 (352) E.L.T. 365 (Tri. - Mumbai).
5Excise Appeal No.75200 of 2020 3.8 It is submitted that the dispute is with respect to the period from F.Y. 2013-14 to 2016-17 whereas the underlying SCN has been issued only on 06.11.2017 by invoking the extended period of limitation. Therefore, the demand for the period till March 2016 (i.e., from F.Y. 2013-14 to 2015-16) is barred by limitation.
3.9 In this regard, it is submitted that it is a trite law that extended period cannot be invoked since the Appellant was regularly filing the statutory returns. In this regard, reliance is placed on the following decisions -
a. M/s. DTM Construction (India) Limited v. Commissioner of Service Tax, Kolkata - 2024 (3) TMI 71 - CESTAT Kolkata b. M/s. M.A. Enterprise v. CCE & ST, Kolkata - 2024 (4) TMI 906 - CESTAT Kolkata 3.10 In view of the above submissions, it is prayed that the impugned order may be set aside and the appeal may be allowed both on merits as well as on account of limitation.
4. The Ld. Authorized Representative appearing on behalf of the Revenue, reiterates the findings of the Adjudicating authority and justifies the confirmed demand.
5. Heard both the sides. Perused the Appeal papers and documents placed before us.
6. The issue involved in this case is to decide as to whether the appellant is eligible for the Cenvat credit for the inputs, which have not been fully utilized in the manufacturing process, since part of the inputs have been lost due to moisture.
6Excise Appeal No.75200 of 2020
7. On an identical issue, the Larger Bench of the Tribunal, in the case of Commissioner of Central Excise, Nagpur v. Associated Cement Companies Limited - 2006 (197) E.L.T. 215 (Tri. - LB), has held as under :
"7. We find a lot of force in the above reasonine of the Assistant Commissioner. Admittedly, the respondents have paid for the entire quantity of the inputs including the moisture content. Duty has also been paid on the said consignment on the total weight, no claim has been made by the assessee from their suppliers on account of this loss of moisture. As such, it is the total quantity of the inputs and total quantum of duty paid on the said inputs, which has to be taken into consideration for the purposes of the modvat credit in terms of Rule 57A. The credit cannot be variated. Subsequently, on account of moisture loss as it is admittedly not the loss of the inputs prior to their use. Denial of credit can only be considered when the inputs themselves are lost prior to their use.
8. We take note of Tribunal decision in the case of P.K.P.N. Spinning Mills Ltd. v. Commissioner of Central Excise, Coimbatore - 1997 (89) E.L.T. 588 (Tri.) wherein under similar facts and circumstances it was held that an assessee would be entitled to full duty paid at the suppliers end and in respect of full quantity, which was received at their premises without any loss of moisture of the fibre on the way. Modvat credit is available to the extent of duty, which was attributable to the goods received in the factory. Inasmuch as full quantity has been received the Modvat credit attributable to the weight of the moisture lost in transit from the suppliers end to the assessees end cannot be denied. The said decision was not taken note of by the single member bench of the Tribunal while deciding the issue in the case of Adhesives & Chemicals.
9. We also note that the Tribunal in the respondent's own case decided earlier have passed orders against the revenue, which have 7 Excise Appeal No.75200 of 2020 not been challenged by the revenue before the higher appellate forum and have thus attained finality.
11. In view of the foregoing, the issue referred to the Larger Bench is answered in favour of the assessee. The appeal papers be sent to the original bench for disposing of the appeal."
8. Relying on the Larger Bench decision, the Mumbai Tribunal, vide their Final Order No.A/85856/2023 dated 12.03.2023, has held as under:
"2.2 Appellant for manufacture of the cement, appellant is getting goods input like slag, clinker, Gypsum. During the transportation and storage there were certain losses which are as indicated in table below.
Description of Quantity Losson account % of loss Duty Demand
input Purchased (in MT) of above (MT) (in Rs.)
Slag 23,46,856 3,26,160 13.89% 1,58,37,465
Clinker 18,87,296 5,546 0.29% 22,93,693
Gypsum 1,00,773 3,011 2.98% 1,57,057
Total 1,82,88,215
2.3 Revenue was of the view that CENVAT Credit should not be admissible to
the appellant in respect of the losses as above as indicated in table.
4.1 In the appellants own case while order reported at 2006 (197) E.L.T.215(Tri. LB) following has been:
7. We find a lot of force in the above reasoning of the Assistant Commissioner. Admittedly, the respondents have paid for the entire quantity of the inputs including the moisture content. Duty has been made by the assesse from their suppliers on account of this loss of moisture. As such, it is the total 8 Excise Appeal No.75200 of 2020 quantity of the inputs and total quantum of duty paid on the said inputs, which has to be taken into consideration for the purposes of the modvat credit in terms of Rule 57A. The credit cannot be variated. Subsequently, on account of moisture loss as it is admittedly not the loss of the inputs prior to their use.
Denial of credit can only be considered when the inputs themselves are lost prior to their use.
8. We take note of Tribunal decision in the case of P.K.P.N. Spinning Mills Ltd. V. Commissioner of Central Excise, Coimbatore - 1997(89) E.L.T. 588 (Tri.) wherein under similar facts and circumstances it was held that an assesse would be entitiled to full duty paid at the suppliers end and in respect of full quantity, which was received at their premises without any loss of moisture of the fibre on the way. Modvat credit is available to the extent of duty, which was attributable to the goods received in the factory. In as much as full quantity has been received the Modvat credit attributable to the weight of the moisture lost in transit from the suppliers end to the assesses end cannot be denied. The said decision was not taken note of by the single member bench of the Tribunal while deciding the issue in the case of Adhesives & Chemicals.
4.2 Similar view has been expressed in the following orders:-
i. Bhuwalka SteelIndustreisLtd.,2010(249)ELT218(Tri.-LB) ii. P.K.P.N.SpinningMillsLtd.1997(89) E.L.T.588(Tri.) iii. CipyPolyurethanesPvt.Ltd.2021(12)TMI238-CESTAT, Mumbai iv. ModiCement Ltd. Vs. 1998 (99)E.L.T. 378[Tribunal].
v. Bombay Dyeing & Mfg. Co.Ltd.,1998(97)ELT101.
4.3 In view of decisions as above we do not find any merits in the impugned order."
9. In the present case, it is not the allegation of the Revenue that the cenvat availed goods have been diverted, without being used in the factory premises. We do not see any allegation to this effect nor any corroborative evidence on this count. The consumption and the evaporation loss have been accounted for by the appellant in their 9 Excise Appeal No.75200 of 2020 records, which is the basis on which the Show Cause Notice has been issued.
10. Therefore, we find that the factual details of the present case and the issue before the Larger Bench and the Mumbai Bench are identical. Therefore, applying the ratio laid down in these decisions, we set aside the impugned order and allow the appeal on merits.
11. Since the appellant has been declaring the Cenvat Credit in the monthly Returns and also has been accounting for the quantities in their books of accounts, no case of suppression has been made out against them. Therefore, we hold that the confirmed demand for the extended period is hit by time-bar.
12. Thus, the appeal stands allowed, with consequential relief, if any, as per law.
(Operative part of the order was pronounced in the open Court.) Sd/ (R. MURALIDHAR) MEMBER (JUDICIAL) Sd/ (K. ANPAZHAKAN) MEMBER (TECHNICAL) sm