2022 (9) TMI 1211 - AT - Central Excise

Reversal of CENVAT Credit - breakage of glass beverage bottles - recovery of excise duty in respect of these breakages treating them as finished goods beverages, along with interest and penalty - HELD THAT - The present case is not in respect of the loss of goods during storage or transportation but is case of the demand of the duty in respect of the breakages of glass bottles during storage and handling. Further the issue is with regards to applicability of the Circulars of 1971 and 1975 to determine whether the breakages was within the prescribed limit. Since the issue in our view is not covered by the above provision of the section 35 B of the Central Excise Act, 1944 the objection raised by the authorized representative cannot be sustained. The reliance placed by the Commissioner (Appeal) on the Circular dated 09.07.2010 to decide the issue against the appellant for the period prior to issuance of the said circulars is contrary to the fact that during the period of dispute there were two circulars of 1971 and 1975 which have been followed by the appellant. It is not even stated in the impugned order that these two circulars were not applicable to the appellant. It is also noted that the MODVAT credit scheme was introduced in the year 1986 and CENVAT credit scheme is refined form of the said scheme. These circulars continued to hold field throughout till 09.07.2010. Observations made by the Commissioner (Appeal) in para 8 of the impugned order cannot be sustained for this simple reason. It is noted that substantial compliance with the circular of 2010 has been made by the appellant by reversing the CENVAT Credit on the inputs used in respect of the finished goods contained in the breakages. Thus, taking the note of the reversal made, the impugned order cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the duty is demandable on the bottles of beverages that have broken.
2. Whether the tribunal has jurisdiction to consider these appeals.
3. Applicability of CBEC circulars regarding breakage allowances.
4. Whether the extended period for demand is invokable.

Detailed Analysis:

1. Duty Demand on Broken Bottles:
The appellants argued that the breakages included duty-paid finished goods from other units, and they had already reversed the CENVAT credit for such breakages. They relied on CBEC circulars from 1971 and 1975, which allowed breakages up to 0.5% to be written off without duty payment. The department contended that the appellants needed to claim remission for such breakages as per a 2010 circular. The tribunal found that the breakages were within the permissible limits and allowed to be written off without filing remission applications, referencing several precedents where similar issues were decided in favor of the appellant.

2. Tribunal's Jurisdiction:
The revenue raised the issue of jurisdiction late in the proceedings, arguing that the tribunal lacked jurisdiction under Section 35B of the Central Excise Act, 1944. The tribunal rejected this argument, noting that the issue was not raised earlier and that the case did not involve loss of goods in transit or storage but dealt with duty on breakages during handling. The tribunal cited previous decisions supporting its jurisdiction to hear such appeals.

3. Applicability of CBEC Circulars:
The tribunal noted that the circulars from 1971 and 1975 were applicable during the disputed period and allowed breakages up to 0.5% to be written off. The 2010 circular, which required remission applications, did not apply retrospectively. The tribunal emphasized that beneficial circulars apply retrospectively, while oppressive ones apply prospectively. The tribunal found that the appellants had complied with the circulars by reversing CENVAT credit for the inputs used in the broken finished goods.

4. Extended Period for Demand:
The Commissioner (Appeals) had invoked the extended period, arguing that the appellants did not file remission applications. The tribunal found that the appellants had periodically reported breakages in their returns, and the revenue was aware of the breakages. The tribunal rejected the invocation of the extended period, noting that the appellants' reporting was sufficient and consistent with the circulars in force during the disputed period.

Conclusion:
The tribunal allowed the appeals, setting aside the impugned orders. It held that the duty was not demandable on the broken bottles within the permissible limits, the tribunal had jurisdiction to hear the appeals, the appellants complied with the applicable circulars, and the extended period for demand was not justified. The tribunal's decision was based on established precedents and the specifics of the case, emphasizing the binding nature of departmental instructions and the retrospective application of beneficial circulars.