2009 (4) TMI 574 - AT - Central Excise

Summary

Issues involved: Determination of Modvat credit eligibility based on quantity discrepancies in input material and consideration of relevant precedent decisions.

Summary:

Issue 1: Modvat Credit Eligibility
The appellant, engaged in manufacturing Caramel colors using Glutrose as an input, faced a demand of duty for the period 1-9-2002 to 31-3-2007 due to discrepancies in the quantity of Glutrose input material. The appellant explained that the differences in quantity were less than 1% over the last five years, attributed to varying weighing scales. Despite paying for the entire quantity to the supplier and availing credit, the Modvat credit was denied. The appellant cited Tribunal decisions supporting their case, which were not considered by the adjudicating authority.

Issue 2: Precedent Decisions
The Tribunal's decision in the case of Ganges Valley Foods (P) Ltd. v. CCE, Kolkata established that a 2% shortage due to evaporation loss did not warrant denial of credit. Similar rulings in cases like CCE, Rajkot v. Bombay Dyeing & Mfg. Co. Ltd. and Praxair India Pvt. Ltd. reiterated that shortages due to the volatile nature of inputs should not result in credit denial. Referring to the Larger Bench decision in CCE, Nagpur v. Associated Cement Companies Ltd., it was held that the appellant should be entitled to full credit of duty paid at the supplier's end. Given the negligible quantity discrepancy of less than 1% over five years, attributed to weighing scale differences for liquid cargo inputs, the Modvat credit was deemed justified.

Conclusion:
The Tribunal ruled in favor of the appellant on the merits, thereby not deciding on the issue of limitation. The appeal was allowed, granting consequential relief to the appellants, and the stay petition was disposed of accordingly.