Custom, Excise & Service Tax Tribunal
M/S.Bajpur Co-Operative Sugar Factory ... vs Cce, Meerut-Ii on 5 March, 2008
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, PRINCIPAL BENCH,
NEW DELHI, COURT NO.1
EXCISE APPEAL NO. 1622 OF 2006
[Arising out of order-in-appeal No. 274-CE/MRT-I1/2006 dated 24.11.2006 passed by the Commissioner of Customs and Central Excise (Appeals), Meerut-II]
Date of Hearing/Decision: 5.3.2008
Honble Mr. Justice S.N. Jha, President
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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 Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
M/s.Bajpur Co-operative Sugar Factory Ltd. Applicant
[Rep. by: Mr. Bipin Garg & Mr. Atul Gupta, Advocates]
Versus
CCE, Meerut-II Respondent
[Rep. Mr. Sumit Kumar,Authorized Representative(DR)]
Coram: Honble Mr. Justice S.N. Jha, President
O R D E R
Per Justice S.N.Jha:
This appeal by the assessee is directed against the order in appeal of the Commissioner (Appeals) dated 24.11.2005, dismissing the appeal of the appellant. The appeal had arisen from the order of Joint Commissioner of Central Excise dated 21.6.2005 directing the appellant to reverse the cenvat credit amounting to Rs.1,06,312/- under rule 12 of Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944 imposing penalty of equal amount and also awarding interest from the said amount of cenvat credits in terms of Section 11 AB of the Act.
2. It is relevant to mention here that the said order of Joint Commissioner was passed in the context of show cause notice dated 11.11.2004. By the said notice the appellant had been asked to show cause as to why the cenvat credit of Rs.3,00,727/- taken on 6,014.53 qtls. of molasses and further cenvat credit of Rs.1,06,312/- involved in the clearance of 42524.9 Bulk Litre (BL) rectified spirit as wastage be not recovered from the appellant. By the said order dated 21.6.2005, the Joint Commissioner accepted the appellants case on the first point relating to cenvat credit of Rs.3,00,727/- on molasses and dropped the demand. He, however, rejected the appellants contention on the second point and confirmed the demand against which the appellant had gone to the Commissioner (Appeals) in the appeal.
3. The facts of the case, briefly, are that the appellant is a manufacturer of sugar and it also has a distillery. Molasses which is a by-product of sugar is stored and utilized in the distillery as inputs for manufacture of country spirit, India made foreign liquor (IMFL), rectified spirit and the denatured spirit. Country spirit and India made foreign liquor are not excisable goods under the Central Excise Act; they are subject to the State Excise Laws with which we are not concerned in these proceedings. As regards the other two goods, while rectified spirit is chargeable to nil rate of duty, denatured spirit is chargeable to duty @ 16% ad valorem.
4. The case of the appellant is that the molasses suffered loss in terms of quantity during storage, and taking into account the nature of the goods, condonation upto 2% of the loss is allowed under the State Excise Law as well as the Central Excise Law vide Central Board of Excise & Customs (CBEC) Circular No.261/15CC/8/82-CX dated 18.7.1983 provided the molasses are stored in pucca pits/steel tanks. On this ground the case of the appellant as regards the loss of molasses giving rise to notice for reversal of modvat credit on the lost quantity of molasses was accepted by the Joint Commissioner which is no more an issue at this stage. The dispute herein is confined to the loss of rectified spirit to the extent of 42,524.9 BL involving cenvat credit of Rs.1,06,312/-.
5. The case of the appellant is that, like molasses, rectified spirit also suffers loss in terms of quantity by natural causes, recognized as a natural phenomenon under the state excise law where the storage loss upto 0.5% is allowed as permissible/condonable amount of loss. It was submitted that though there is no parallel provision under the central excise law, or circular of the Board regarding storage loss of rectified spirit, as in the case of molasses, the storage loss being a natural phenomenon, the party should not be asked to reverse credit on the amount of loss which was even less than 0.5%. It was submitted that in the cases of Commissioner of Central Excise, Pune-III Vs. Shree Siddheshwar SSK Limited 2007 (209) ELT 150(Tri.-Mumbai), and Commissioner of Central Excise, Pune-II Vs. Ajinkyatara SSK Ltd. 2007 (210) ELT 223 (Tri.-Mumbai) it has been held, placing reliance on the norms laid down under the state excise law that the loss in storage of rectified spirit is in the nature of invisible losses and for loss within the permissible limit the assessee cannot be held liable.
6. On behalf of the Revenue it was submitted that there is no specific provision in the Central Excise Law under which the appellant can claim the benefit of an assumed loss, like the molasses with respect to which the appellants case has already been accepted by the Joint Commissioner. He relied on Collector of Central Excise, Meerut Vs. Dhampur Sugar Mills 1986 (24) ELT 28A (Tribunal), Hindustan Insecticides Ltd. Vs. Commissioner of Central Excise, Cochin 1988 (33) ELT 575 (Tribunal) and Madan Mohan Vs. Superintendent of Central Excise 1992 (58) ELT 497(All.). Departmental Representative also submitted that the claim of the appellant is beyond the show cause notice which was limited to violation of rule 6(3)(i)(a) of the Cenvat Credit Rules, 2002.
7. It is true that there is no express provision in the Central Excise Act, or the Rules made thereunder, nor is there any circular of the Board, as in the case of molasses, under which the assessee can claim remission on the quantity lost in the case of rectified spirit. In fact, had there been any specific provision, one way or the other, there would be no difficulty in accepting or rejecting the claim of the appellant at the threshold. However, the fact that there is no provision does not mean the appellants claim is to be rejected outright.
8. One cannot lose sight of the volatile nature of rectified spirit. It is not difficult to visualize that in whatsoever manner it may be stored, some loss is bound to occur as a result of natural causes having regard to the nature of the goods. If it is a fact that under the State Excise Law storage loss upto 0.5% is allowed, that can be taken to be a safe basis for allowing a similar benefit under the Central Excise Law as well. Dealing with the same goods i.e. rectified spirit, a learned Single Member of this Tribunal in Shree Suddheshwar SSK Limited (supra) observed as under :-
It is noticed that in this particular case both the raw materials and the finished goods in question are susceptible to losses in storage and the losses recorded are reportedly within the permissible norms of the State Excise authorities. The losses in storage of the finished products, namely, rectified spirit are in the nature of invisible losses. When the finished product is lost in visible form due to natural cause naturally the ingredients also gets lost. The company invoices their final products taking into account such invisible losses. The reasoning adopted by the Commissioner (Appeals) in granting relief to the assessee is acceptable and her order is not required to be interfered with.
9. Similar observations were made in the case of Ajinkyatara SSK Ltd. (supra). Coming to the decisions cited on behalf of the Revenue, the case of Dhampur Sugar Mills (supra) related to loss of molasses. It transpired that the molasses had been stored in tanks beyond their capacity, exposed to rain water, overflow and leakages. In the facts and circumstances, the Tribunal observed that loss of molasses will not fall within the ambit of proviso to Rule 49 as loss cannot be attributed to natural causes or unavoidable accidents. In the case of Hindustan Insecticides Ltd. (supra), 4196 litres of benzene and spirit were sent in two railway tankers. Of the dispatched quantity of benzene, Hindustan Insecticides received 20592 litres, there was a transit loss of 186 litres, the other wagon carrying 21138 litres of spirit did not arrive. It was held that loss was not by natural cause or by unavoidable accident and the appellant could not claim the benefit of remission under rule 196 of the Central Excise Rules, 1944. The case of Madan Mohan (supra) related to remission of duty on tobacco which was found unfit for human consumption. It was held that remission of duty was not admissible because tobacco was not stored in a warehouse.
10. It would thus appear that the cases relied upon by the Revenue were decided in different factual background and the decisions lend no help to the Revenue. On the other hand, the case of Ajinkyatara SSK Ltd. related to loss of rectified spirit itself. I am in respectful agreement in the reasoning of the Learned Member. I am also of the view that having regard to the nature of the goods i..e. rectified spirit, some loss of quantity is bound to occur as a natural phenomenon. The case of the appellant that it was entitled to count the loss 42,524.9 BL spirit as wastage was in accordance with law and the authorities below committed error in rejecting the same, and the impugned orders so far as they relate to utilization of credit of Rs.1,06,312/- involved in the clearance of 42,524.9 BL rectified spirit are accordingly set aside.
11. In the result, the appeal is allowed.
[Dictated and pronounced in the open Court] [Justice S.N. Jha] President nk