2015 (12) TMI 1393 - AT - Central Excise

Denial of MODVAT Credit - appellant had removed molasses from the sugar factory to the Kachcha pit situated outside the factory premises - Held that - Receipt of the disputed input i.e. molasses in the chemical unit of the appellant and their use within the factory for the intended purpose have not been disputed either in the adjudication order or in the impugned order. However, the modvat credit has been denied on the sole ground that the bill issued from the kachcha pit to the chemical unit is not a proper/ valid document prescribed under Rule 52A of the erstwhile Central Excise Rules, 1944 read with Rule 57G for taking the modvat credit - Notification dated 09.02.1999 issued by the Central Government has not been considered in proper prospective by the authorities below while denying the modvat benefit to the appellant. According to the said Notification, the modvat benefit shall not be denied, if the duty paid character of the input and its receipt and utilization in the factory for the intended purpose is not in dispute. In the circumstance of the present case, since the original authority has not carried out proper exercise, I am of the view that the matter should be remanded back to the jurisdictional Assistant/Dy. Commissioner of Central Excise, who shall verify the documents as provided under the said Notification and if maintenance of such documents are in conformity with the requirement of the said Notification, the Modvat benefit should be allowed to the appellant. - quantum of shortage/loss is negligible in comparison with the total material handled by the appellant. Thus, negligible difference due to various factors should be ignored and full credit should be allowed to the appellant - Appeal disposed of.

Summary

Issues:
- Denial of Modvat credit on molasses
- Validity of documents for taking Modvat credit
- Consideration of Notification No.7/99-CE (N.T.)
- Quantum of shortage of molasses

Analysis:

Denial of Modvat credit on molasses:
The appellant, engaged in sugar and chemical manufacturing, faced denial of Modvat credit by the Central Excise Department due to the removal of molasses from the sugar factory to the chemical unit. The denial was based on the argument that the bill issued for the transfer was not a prescribed document for taking credit. The Commissioner (Appeals) upheld this denial, leading to the appeal before the Tribunal.

Validity of documents for taking Modvat credit:
The appellant argued that both units belonged to the same company, and the duty paid on molasses at the sugar unit was rightfully taken as Modvat credit in the chemical unit. The appellant contended that the goods were not diverted for other purposes and were under physical control scrutiny. The appellant cited Notification No.7/99-CE (N.T.) and a judgment from the Allahabad High Court to support their claim. However, the respondent highlighted that Modvat credit should be based on invoices, not bills, as per the Central Excise Rules.

Consideration of Notification No.7/99-CE (N.T.):
The Tribunal observed that the authorities failed to consider the Notification issued by the Central Government, which allows Modvat benefit if the duty paid input's character and utilization for the intended purpose are not in dispute. The Tribunal directed a re-examination by the Assistant/Dy. Commissioner to verify compliance with the Notification's requirements, emphasizing that if documents are in order, the Modvat benefit should be granted.

Quantum of shortage of molasses:
Regarding the shortage of molasses, the Tribunal noted that the loss was negligible compared to the total material handled by the appellant. It was deemed that minor differences should be disregarded, and full credit should be allowed. Consequently, the Tribunal found the denial of Modvat credit to be legally improper and ruled in favor of the appellant, directing the allowance of the credit.

In conclusion, the Tribunal remanded the matter for verification of documents as per the Notification and instructed full credit allowance due to the insignificant shortage. The appeal was disposed of in favor of the appellant.