2004 (4) TMI 422 - AT - Central Excise

Summary

Issues Involved:
Disallowed Modvat credits for Light Diesel Oil and Furnace Oil; Imposition of penalty.

Analysis:
The case involves stay applications arising from 5 appeals challenging a common order disallowing Modvat credits totaling Rs. 5,35,296 for Light Diesel Oil (L.D.O.) and Furnace Oil (F.O.) supplied by Indian Oil Corporation Ltd. (IOC) refinery. Additionally, a penalty of Rs. 37,000 has been imposed on the appellants.

The counsel for the applicants argues that the credits were denied due to alleged non-receipt and utilization of mineral oils in the manufacture of final products. He explains that during the relevant period, the oils received from the refinery were short in quantity at the appellants' factory due to spillage and evaporation losses in transit, amounting to less than 0.25%. The counsel cites an old Board Circular allowing condonation of transit losses up to 0.5% for LDO and FO and refers to a Tribunal decision in a similar case where a 1% quantity difference was condoned for another mineral oil, Naphtha, affirmed by the Apex Court.

However, the DR opposes the applications based on a previous Tribunal decision in the appellants' case where Modvat credits were disallowed for LDO and FO shortages. The presiding judge notes that the Tribunal's earlier decision is against the applicants and that no substantial factual difference has been shown to distinguish the cases. The judge highlights that the Circular relied upon is outdated, considering changes in mineral oil specifications over time. Despite acknowledging an arguable case, the judge finds the applicants have not established a strong prima facie case and have not pleaded financial hardships.

Considering all aspects, the judge directs the applicants to pre-deposit Rs. 3 Lakhs within 6 weeks and report compliance by a specified date. Compliance with this direction would lead to a waiver of pre-deposit and a stay of recovery for the penalty and remaining duty amount.