2016 (6) TMI 764 - AT - Central Excise

Reversal of credit taken - credit taken on the gases in respect of these losses on the ground that the said inputs were either not received or were not accounted for purposely or used in the manufacture of exempted goods under Rule 57(i) of the Central Excise Rules, 1944 - Held that - The process losses during the filling of a cylinder are use of input in or in relation to manufacturing process. Further find that the decision of Hon ble High Court of Andhra Pradesh in case of Andhra Paper Mills (2011 (3) TMI 405 - ANDHRA PRADESH HIGH COURT ) goes a step further and allowed the credit in respect of the actual quantity filled even though the part of quantity was returned in this case later. - Decided in favour of assessee

Summary

Issues: Reversal of credit on gases due to losses during manufacturing process, imposition of penalty under Rule 173Q of Central Excise Rules, 1944.

Analysis:
1. The appellant, M/s BOC India Ltd., faced a demand for reversal of credit on gases like oxygen, nitrogen, and organ due to losses during various stages of the manufacturing process. The revenue contended that these losses were not accounted for or purposely used in the manufacture of exempted goods under Rule 57(i) of the Central Excise Rules, 1944. Additionally, a penalty was imposed under Rule 173Q of the Central Excise Rules, 1944.

2. The appellant's counsel argued that in a previous case, the Tribunal had allowed relief for gases lost during the filling of cylinders. This decision was upheld by the Hon'ble Gujarat High Court. Moreover, in another case, the Tribunal had ruled that gases lost during the manufacturing process should be considered as used in or in relation to the manufacturing process, and credit was allowed. This decision was also upheld by the Hon'ble High Court of Delhi. The counsel further referenced a case from the Hon'ble High Court of Andhra Pradesh where credit for a part of chlorine gas returned by the supplier was allowed as a process loss in the manufacturing process.

3. The learned AR relied on a decision from the Hon'ble High Court of Patna in the case of I.O.L. Ltd. to support their argument.

4. Upon reviewing the submissions, the judge noted that the appellant's cited decision in their own case established that process losses during cylinder filling are considered as the use of input in or in relation to the manufacturing process. Furthermore, the judge highlighted the decision of the Hon'ble High Court of Andhra Pradesh, which allowed credit for the actual quantity filled even when a part of the quantity was later returned. Based on these precedents, the judge concluded that the issue was adequately addressed, and the appeal was allowed.

5. The judgment was pronounced in court on 27.04.2016, affirming the appellant's position based on established legal principles and precedents.