2014 (1) TMI 274 - AT - Central Excise

Storage loss of molasses - Benefit of Cenvat credit on duty paid on molasses - Entitlement of full duty paid on the quantum of the molasses or the credit is required to be reduced to the extent of molasses lost on account of storage Held that - The loss had occurred on account of natural phenomena and was within the prescribed limit of 2% as laid down by the Board Circular dated 6/2/82 Following India Glycols Ltd. and Shri V.M. Tiwari vs. CCE 2004 (4) TMI 534 - CESTAT, New Delhi there was no justification for denial of Cenvat credit in respect of the molasses lost during storage when admittedly the duty stands paid by the manufacturer on the full quantum of the molasses order set aside Decided in favour of Assessee.

Summary

Issues Involved:
Whether the manufacturer of Denatured Ethyl Alcohol and Fusel Oil, availing Cenvat credit of duty paid on molasses, is entitled to avail the full duty paid on the molasses recorded by them or if the credit should be reduced due to molasses lost during storage.

Analysis:
The main issue in the present appeal was whether the manufacturer, availing Cenvat credit of duty paid on molasses, could avail the full duty paid on the recorded quantity of molasses or if the credit should be reduced due to molasses lost during storage. The lower authorities had disallowed the credit related to the storage loss of molasses. However, the Tribunal noted that the loss occurred due to natural phenomena and was within the prescribed limit of 2% as per the Board Circular. The Tribunal referred to an earlier decision in a similar case involving the appellant, where it was held that for the purpose of Cenvat credit, no reduction should be made when the input (molasses) quantity is reduced due to storage. The Tribunal found no justification for denying Cenvat credit for molasses lost during storage when duty had been paid on the full quantity of molasses. Consequently, the impugned orders were set aside, and the appeal was allowed with consequential relief to the appellants.

This judgment clarifies that when a manufacturer avails Cenvat credit of duty paid on molasses and faces storage loss within the prescribed limit, the credit should not be reduced. The decision was based on the principle that if duty had been paid on the full quantity of molasses, denial of Cenvat credit for the lost quantity during storage is unjustified. The Tribunal emphasized that natural storage losses within the specified limit should not impact the entitlement to Cenvat credit. The reference to a previous decision involving the appellant further supported the conclusion that no reduction in credit should be made for storage losses of molasses. As a result, the Tribunal overturned the lower authorities' decision and allowed the appeal, providing relief to the appellants.