2010 (6) TMI 774 - AT - Central Excise

Summary

Issues involved: Appeal against demand confirmation of Rs. 1,70,572/- with interest and penalty u/s Cenvat Credit Rules, 2004 for excess material consumption by job worker.

Summary:
The appellants, engaged in manufacturing electrical fans, sent inputs to job workers for processing. Job worker used excess materials, leading to recovery of costs via debit notes. Dispute arose over whether Cenvat credit can be denied for excess utilization. Appellants argued excess consumption due to technical factors, collecting penal charges for efficiency. Citing Galaxy Surfactants Ltd. case, it was contended that such shortages do not warrant duty demand if not due to less yield. Revenue argued for credit reversal due to recovered material costs. Tribunal found in favor of appellants, holding excess utilization not grounds for credit denial, following Galaxy Surfactants Ltd. decision. Impugned order set aside, appeal allowed.

The key issue was whether CENVAT credit availed on higher input utilization can be denied if not directly related to final product manufacture. Appellants contended excess consumption due to processing losses, collecting penal charges for efficiency. Tribunal relied on Galaxy Surfactants Ltd. case, stating accumulated shortages not warranting duty demand if not due to less yield. Decision favored appellants, setting aside demand confirmation and allowing the appeal.