2014 (5) TMI 1011 - AT - Central Excise

CENVAT Credit - Storage loss - Held that - total of the storage losses for the period from June 2007 to February 2009 comes to 2135 qtls., that it is this loss which had been reported to the Jurisdictional Central Excise authorities as transit loss by mistake, while it is actually storage loss - since it is 0.45% of the total quantity received, the same is within the limit of 2% storage loss prescribed as condonable by the Board - Once it is treated as storage loss, the ratio of the judgment of Division Bench of the Tribunal in the case of Jubilant Organosys Ltd. vs. CCE, Meerut - II (2004 (5) TMI 486 - CESTAT, NEW DELHI) would be applicable and the Cenvat credit in respect of such loss cannot be denied.. In any case, even if it is treated as transit loss, since the same is 0.5%, the Cenvat credit cannot be denied in view of judgment in the case of Dhampur Sugar Mills Ltd. vs. CCE, Meerut - II 2010 (12) TMI 291 - CESTAT, DELHI which is based on judgment of Larger Bench of the Tribunal in the case of CCE, Chennai vs. Bhuwalka Steel Industries Ltd. 2009 (11) TMI 177 - CESTAT, CHENNAI (LB) . - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit for alleged transit loss of molasses.
2. Classification of loss as storage loss or transit loss.
3. Applicability of judgments regarding denial of Cenvat credit for storage or transit losses.

Analysis:
1. The appellant, a manufacturer of sugar and molasses, faced a show cause notice for denial of Cenvat credit on molasses due to reported transit loss. The Assistant Commissioner confirmed the demand for Cenvat credit along with interest and penalty. The Commissioner (Appeals) upheld this decision, leading to the appellant filing an appeal. The appellant claimed the loss reported as transit loss was actually storage loss due to evaporation. They argued that the reported loss was within the condonable limit of 2% storage loss prescribed by the Board.

2. The appellant contended that the loss mentioned as transit loss was a storage loss, supported by records maintained for State Excise Authorities. These records showed monthly storage losses of molasses, totaling 2135 qtls. for the period in question. The appellant's argument was that the loss reported mistakenly as transit loss was, in fact, within permissible limits for storage loss. Citing precedents like Kesar Enterprises Ltd. and Jubilant Organosys Ltd., they claimed that Cenvat credit cannot be denied for such storage losses before the final product's manufacture.

3. The Departmental Representative opposed the appellant's claim, emphasizing the admission of the loss as transit loss by the appellant. However, the tribunal found merit in the appellant's argument, ruling that the reported loss was indeed storage loss, not transit loss. Referring to previous judgments, including Dhampur Sugar Mills Ltd. and CCE, Chennai vs. Bhuwalka Steel Industries Ltd., the tribunal held that even if treated as transit loss, the Cenvat credit could not be denied. Consequently, the tribunal set aside the impugned orders and allowed the appeal in favor of the appellant, providing consequential relief.

This detailed analysis of the judgment showcases the issues involved, the arguments presented by both parties, and the tribunal's decision based on legal precedents and interpretations of storage and transit losses in the context of Cenvat credit denial.