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2004 (4) TMI 484 - AT - Central ExciseCenvat/Modvat - Caustic soda lye (CSL) - Adjudication - Res judicata - Cenvat/Modvat - Inputs
Issues:
Challenge to order denying Modvat credit on Caustic Soda Lye (CSL) usage in final product manufacture. Analysis: The appeal contested the order denying Modvat credit on CSL usage by the appellants in the manufacture of Calcined Alumina. The basis for the show cause notice was a cost audit report indicating unaccounted CSL loss, alleged to be short receipt camouflaged as 'unaccounted soda loss.' The appellants argued lack of tangible evidence to prove the loss was pre-manufacturing transit loss, as assumed by the department. They cited Rule 57A and Rule 57D(1) to support their claim that CSL loss during manufacturing is covered, thus Modvat credit reversal is unwarranted. The appellants also challenged the authority of the Cost Accountant to fix consumption norms. Previous decisions dropping proceedings against the appellants on similar grounds were highlighted, questioning the imposition of penalty and invoking an extended period. The department maintained that unaccounted CSL losses were due to short receipt pre-manufacturing, justifying the Modvat credit disallowance. The Tribunal noted the appellants' status as a Public Sector Undertaking manufacturing Alumina, availing Modvat credit on inputs including CSL. The appellants' detailed process of CSL procurement, storage, and usage was outlined, emphasizing the lack of evidence supporting the department's claim of short receipt. The Tribunal highlighted the absence of flaws in the appellants' documented procedures, emphasizing previous dropped proceedings based on detailed facts and Cost Accountant reports. The Tribunal found no tangible evidence supporting the department's allegations of short receipt of CSL by the appellants. The Tribunal emphasized the appellants' adherence to documented procedures from CSL procurement to usage, questioning the basis of the audit report suggesting excessive CSL loss. Previous dropped proceedings and clarifications provided by the appellants were considered, emphasizing the department's failure to prove the alleged transit loss. Citing legal precedents, the Tribunal stressed that exact correlation between raw materials and final products is not required, urging acceptance of the appellants' technical clarifications. The Tribunal concluded that the department failed to provide convincing evidence, setting aside the impugned order and allowing the appeal with any consequential relief. In conclusion, the Tribunal ruled in favor of the appellants, setting aside the order denying Modvat credit on CSL usage in the final product manufacture, emphasizing the lack of evidence supporting the department's allegations of short receipt and the appellants' adherence to documented procedures.
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