2016 (2) TMI 639 - AT - Central Excise

Eligibility of credit on the full quantity of coal bought on payment of duty from coal mines - Department denied the credit attributable to the invisible losses that occur due to washing of the coal to make it fit for use - Held that - There is no allegation in any proceedings that certain quantity of inputs have been diverted or contained in some other product that arose during the processing of the coal. The admitted fact is that the 3% loss is solely attributable to washing. Considering the above factual position, find no ground to restrict the Cenvat credit when the appellants bought and paid for the quantities of coal cleared from the coal mines. Thus find the impugned order is unsustainable and accordingly allow the appeal.

Summary

Issues:
1. Denial of Cenvat credit on coal purchased due to weight loss during washing process.
2. Alleged non-compliance with procedure for movement of goods to job worker.

Analysis:
1. The appeal concerned the denial of Cenvat credit on coal purchased by the appellants for the manufacture of Ferro Alloys, as a 3% weight loss occurred during the washing process conducted by a job worker. The Assistant Commissioner initially permitted the credit but later proceedings were initiated against the appellants leading to disallowance of credit and imposition of penalty. The Tribunal considered whether the appellants were entitled to credit for the full quantity of coal purchased. The Tribunal found that the weight loss during washing was solely attributable to the process and not due to diversion or misuse of inputs. Relying on precedents and legal provisions, the Tribunal held that the appellants were justified in claiming credit for the entire quantity of coal purchased, overturning the lower authorities' decision.

2. The learned counsel for the appellants argued that the weight loss during washing should not be a basis for denying credit as it was an inherent part of the manufacturing process. The counsel highlighted that the appellants had disclosed all details to the authorities while seeking permission for monthly credit. The Assistant Commissioner's decision to restrict credit based on physical quantity received was challenged, emphasizing that the loss during washing should not be held against the appellants. The Tribunal agreed with the appellants, noting that the denial of credit was legally unsustainable. The Tribunal also considered the time bar issue and lack of suppression on the part of the appellants, ultimately allowing the appeal and overturning the previous orders disallowing the credit.

3. On the alleged non-compliance with the procedure for movement of goods to the job worker, the learned Authorized Representative reiterated the findings of the lower authorities. However, the Tribunal did not find this argument compelling in the context of the main issue regarding the denial of Cenvat credit. The Tribunal's decision primarily focused on the justification of denying credit based on weight loss during the washing process and found in favor of the appellants based on the factual position and legal precedents cited.

In conclusion, the Tribunal allowed the appeal, holding that the appellants were entitled to claim Cenvat credit on the full quantity of coal purchased, despite the weight loss occurring during the washing process. The decision emphasized that the loss was inherent to the manufacturing process and did not warrant the denial of credit.