Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (12) TMI 291 - AT - Central ExciseCenvat Credit - Diversion of goods - natural loss - transit loss - evaporation etc. - The appellant is a manufacturer of sugar and molasses and other chemicals - During the period from February 1999 to March 2000 the sugar division paid duty on molasses and raised invoices on the chemical division and stored the duty paid goods in the sugar division and the chemical division took the credit of duty paid by the sugar division - The original authority decided the show cause notices and denied the credit taken amounting to Rs. 65, 320/- on short received quantity of 1317.00 qtl. of molasses under Rule 57G and ordered recovery of the same under Rule 57I read with Section 11A of Central Excise Act 1944 - it is not a case that some part of the quantity which was invoiced by the sugar division has been diverted and not sent to the chemical division because sender and receiver unit are the same legal entity - he larger bench of the Tribunal in the case of Bhuwalka Steel Industries Ltd considered the transit loss involved in transfer from one legal entity to another legal entity and prescribed guidelines for condoning the losses - It was held that the order of the lower authorities cannot be allowed to survive and the same are set aside and the appeal is allowed with consequential relief as per law
Issues:
- Disallowance of credit on short received quantity of molasses - Application of guidelines for condoning losses in transit - Interpretation of findings in the case of Bhuwalka Steel Industries Ltd - Examination of diversion and loss in storage within the same factory premises Analysis: 1. The appeal addressed the disallowance of credit on a short received quantity of molasses by the sugar division to the chemical division. The original authority and the Commissioner (Appeals) upheld the denial of credit amounting to Rs.65,320 on the short received quantity of 1317.00 qtl. of molasses under Rule 57G, ordering recovery under Rule 57I read with Section 11A of the Central Excise Act, 1944. 2. The appellant argued that the credit should not be disallowed due to small variations caused by storage loss, drayage, and handling/transit loss. They relied on the decision of the Larger Bench of the Tribunal in CCE, Chennai vs. Bhuwalka Steel Industries Ltd., where it was held that minor losses during transit should be ignored, and credit allowed after considering relevant factors mentioned in the order. 3. The respondent contended that the decision in Bhuwalka Steel Industries Ltd. was not applicable since the disputed short found goods were never received by the chemical division and thus not used by the appellants. The Tribunal noted that the sender and receiver units were part of the same legal entity, situated in the same registered premises, emphasizing that the receiver did not receive a lesser quantity than invoiced, and no diversion of goods occurred. 4. The Tribunal referred to the guidelines set by the Larger Bench of the Tribunal in Bhuwalka Steel Industries Ltd. regarding transit loss between legal entities. The guidelines emphasized factors such as diversion en-route, nature of goods, countable packages, weighment differences, compensation claims, and industry norms for tolerances, highlighting that each case must be decided on its merits without rigid rules. 5. Upon examining the case in light of the guidelines, the Tribunal found no diversion and minimal storage loss due to drayage and handling/transit loss within the same factory premises. The losses ranged from 0.18% to 0.38%, falling within acceptable limits. The transfer being between two divisions of the same factory, the Tribunal concluded that the lower authorities' decision could not stand, setting it aside and allowing the appeal with consequential relief.
|