Custom, Excise & Service Tax Tribunal
Dhampur Sugar Mills Ltd vs Cce,Meerut-Ii on 1 December, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Single Member Bench
Excise Appeal No.1141 of 2009-SM
(Arising out of Order-in-Appeal No.144-CE/MRT-II/2008 dated 5.12.2008 passed by the CCE (A), Meerut-II)
Date of Hearing/Decision: 01.12.2010
For approval and signature:
Honble Mr.M.Veeraiyan Member (Technical)
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?
Dhampur Sugar Mills Ltd. Appellant
Vs.
CCE,Meerut-II Respondent
Present for the Appellant : Shri Alok Arora, Advocate
Present for the Respondent: Shri Anil Khanna, SDR
Coram:
Honble Mr.M.Veeraiyan, Member (Technical)
ORDER No.____________/
PER: M.VEERAIYAN
This is an appeal against order of the Commissioner (Appeals) No.144-CE/MRT-II/2008 dated 5.12.2008 which has been passed in pursuance of remand order of the Tribunal dated 22.7.08.
2. Heard both sides.
3. The appellant is a manufacturer of sugar and molasses and other chemicals. They are having three divisions referred to as chemical division, paper division and sugar division. During the period from February, 1999 to March, 2000, the sugar division paid duty on molasses and raised invoices on the chemical division and stored the duty paid goods in the sugar division and the chemical division took the credit of duty paid by the sugar division. Show cause notices were issued alleging short receipt of molasses from the sugar division to chemical division which are as follows:-
Sl.
No.
Show cause notice No. and date
Qty. (Qtls.)
Shortage (Qtls.)
Amount
(in Rs.)
Percent of loss
1
20CE/DSM(Chem.)/SCN/DPR/99/240 dated 25.8.99
180337.25
322.35
15,587.00
0.18
2
20CE/DSM(Chem.)/SCN/DPR/99/259 dated 24.4.2000
150124.20
425.05
21,253.00
0.28
3
20CE/DSM(Chem.)/SCN/DPR/99/52 dated 19.01.2000
164182.60
559.80
27,990.00
0.34
4
20CE/DSM(Chem.)/SCN/DPR/99/300 dated 14.10.99
334488.30
9.80
490.00
0.00
4. The original authority decided the show cause notices and denied the credit taken amounting to Rs.65,320/- on short received quantity of 1317.00 qtl. of molasses under Rule 57G and ordered recovery of the same under Rule 57I read with Section 11A of Central Excise Act, 1944. The Commissioner (Appeals) has upheld the order of the original authority.
5. Learned Advocate for the appellant submits that the credit cannot be disallowed on the ground that there was a small variation due to storage loss, drayage and handling/transit loss. He relies on the decision of the Larger Bench of the Tribunal in the case of CCE, Chennai vs. Bhuwalka Steel Industries Ltd. reported in 2010 (249) ELT 218 wherein it has been held that minor losses during transit has to be ignored and credit should be allowed after considering the relevant factors mentioned in para 12 and 13 of the order.
6. Learned SDR reiterated the findings and reasoning of the Commissioner (Appeals) and the original authority. He submits that the decision of the Larger Bench of the Tribunal in the case of Bhuwalka Steel Industries Ltd is not applicable as the disputed short found goods were never received by the chemical division of the appellant factory and therefore the same were not used by the appellants.
7. I have carefully considered the submissions from both sides and perused the records. Undisputedly the senders unit and receivers unit are parts of the same legal entity. It was also submitted that they are situated in the same registered premises. It is not a case of sender being a different from legal entity the receiver. It cannot be the case that the receiver has received a lesser quantity than what was invoiced. The molasses, undisputedly contain water, and moisture and therefore some changes in weight due to natural process was expected. It is not a case that some part of the quantity which was invoiced by the sugar division has been diverted and not sent to th chemical division.
8. The larger bench of the Tribunal in the case of Bhuwalka Steel Industries Ltd considered the transit loss involved in transfer from one legal entity to another legal entity and prescribed guidelines for condoning the losses in para 12 and 13 of the order which are reproduced :-
12. Considering arguments from both sides and the case laws cited by both sides which have been extracted above, we are of the considered view that different types of shortages cannot be dealt with according to any one inflexible and fixed standard for the purpose of allowing credit under Rule 3(1) of the Cenvat Credit Rules. Decision to allow or not to allow credit under rule 3(1), in any particular case, will depend on various factors such as the following:-
(i) Whether the inputs/capital goods have been diverted en-route or the entire quantity with the packing intact has been received and put to the intended use at the recipient factory.
(ii) Whether the impugned goods are hygroscopic in nature or are amenable to transit loss by way of evaporation etc.
(iii) Whether the impugned goods comprise countable number of pieces or packages and whether allsuch packages and pieces have been received and accounted for at the receiving end.
(iv) Whether the difference in weight in any particular case is on account of weighment on different scales at the despatch and receiving ends and whether the same is within the tolerance limits with reference to the Standards of Weights and Measures Act, 1976.
(v) Whether the recipient assessee has claimed compensation for the shortage of goods either from the supplier or from the transporter or the insurer of the cargo.
13. All these factors listed above and any other relevant factor has to be kept in view in deciding any particular case as to whether the entire consignment has been received at the end of the recipient assessee without any diversion. Tolerances in respect of hygroscopic, volatile and such other cargo has also to be allowed as per industry norms excluding, however, unreasonable and exorbitant claims. Similarly, minor variations arising due to weighment by different machines will also have to be ignored if such variations are within tolerance limits. In our view, each case has to be decided according to merit and no hard and fast rule can be laid down for dealing with different kinds of shortages.
9. If the facts of the present case are examined in the light of the guidelines prescribed in the decision of the Larger Bench of the Tribunal, it is clear that there is no finding of any diversion and the loss in storage due to drayage and handling/transit loss within the same factory premises (from sugar division to chemical division) is minimal and it ranges only in the range of 0.18% to 0.38%. In the cited decision, losses noticed in respect of transfer of goods from one legal entity to another has been held admissible subject to the conditions mentioned therein. In the present case, the transfer is between two divisions of the same factory and therefore, appellants case stands on a strange footing.
10. In view of the above, the order of the lower authorities cannot be allowed to survive and the same are set aside and the appeal is allowed with consequential relief, as per law.
(Dictated and Pronounced in the open court)
(M.VEERAIYAN)
MEMBER (TECHNICAL)
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