2004 (4) TMI 534 - AT - Central Excise

Whether appellants are entitled to take credit on the value of the total quantity of molasses received in its factory for the purpose of manufacture ethyl alcohol without taking into consideration the certain percentage of loss which happens to be storage loss?

Summary

Issues:
1. Entitlement to take credit on the total quantity of molasses received in the factory for manufacturing ethyl alcohol without considering storage loss.
2. Interpretation of storage loss in the context of Modvat credit.
3. Applicability of Board circular on storage loss of molasses.
4. Comparison of decisions in similar cases regarding Modvat credit.
5. Validity of penalty imposed on the appellant.

Entitlement to take credit on the total quantity of molasses:
The appeal challenged the Commissioner's decision on whether the appellant could claim credit on the total quantity of molasses received in the factory for manufacturing ethyl alcohol without accounting for storage loss. The appellant argued that the storage loss was within prescribed norms of 2% and should not affect their entitlement to credit. They cited a Tribunal decision and a circular by the Board to support their claim. The Tribunal noted that the appellant received the full quantity of molasses and was entitled to credit for the entire amount, considering the purpose of the Modvat scheme.

Interpretation of storage loss for Modvat credit:
The Tribunal analyzed the concept of storage loss in the context of Modvat credit. It highlighted that the relief under the Modvat scheme is based on the duty paid on inputs used in manufacturing the finished product. In this case, the appellant received the full quantity of the input material, and any loss due to atmospheric changes during storage did not affect their entitlement to the full credit of duty paid on the input.

Applicability of Board circular on storage loss:
The appellant relied on a circular issued by the Board regarding storage loss of molasses to support their argument. The circular allowed condonation of losses up to 2% irrespective of storage conditions. The Tribunal considered the circular and previous decisions to conclude that the appellant should receive credit for the entire quantity of molasses, even if there was some loss during storage.

Comparison of decisions in similar cases:
The Tribunal compared the present case with previous decisions, including the Kesar Enterprises case, where the issue of Modvat credit for input materials was addressed. It noted that the Revenue's appeal against the Tribunal's decision in the Kesar Enterprises case was dismissed by the Supreme Court. The Tribunal found no reason to deviate from the principles established in prior cases regarding Modvat credit for inputs like molasses.

Validity of penalty imposed on the appellant:
The Tribunal also addressed the penalty imposed on the appellant in a related matter. Considering the decision on the main issue of credit entitlement for molasses, the Tribunal concluded that the penalty could not be sustained. Therefore, the Tribunal set aside the penalty and allowed the appeal in favor of the appellant.

This detailed analysis of the judgment provides insights into the issues raised, the arguments presented, and the Tribunal's reasoning in deciding the appeal related to Modvat credit for molasses and the penalty imposed on the appellant.