2008 (3) TMI 95 - AT - Central Excise

Appeal against order of Comm. (A) directing the appellant to reverse the credit - lost of rectified spirit in storage - some loss is a natural phenomenon however CEA, or the Rules made there under doesn t allow the assessee to claim remission on the quantity lost in the case of rectified spirit, but loss is within permissible limit of 0.5%, as set by State Excise Authority, hence benefit of same is allowable entitled to count the loss of spirit as wastage assessee s appeal allowed

Summary

Issues: Appeal against order directing reversal of cenvat credit on rectified spirit and imposition of penalty.

Analysis:
1. The appellant challenged the order of the Joint Commissioner directing the reversal of cenvat credit on rectified spirit and imposing a penalty. The appeal arose from a show cause notice regarding the cenvat credit taken on molasses and rectified spirit.

2. The Joint Commissioner accepted the appellant's case on the cenvat credit of molasses but rejected the contention regarding the rectified spirit, leading to the appeal before the Commissioner (Appeals).

3. The appellant, a manufacturer of sugar with a distillery, argued that like molasses, rectified spirit also incurs natural losses in quantity during storage. The appellant relied on state excise laws allowing condonation of storage losses for molasses and argued for a similar treatment for rectified spirit.

4. The Revenue contended that there is no specific provision in the Central Excise Law for claiming assumed losses on rectified spirit, unlike molasses. The Departmental Representative argued that the appellant's claim exceeded the scope of the show cause notice.

5. The Tribunal noted the absence of an express provision for remission on lost quantity of rectified spirit. However, considering the nature of rectified spirit and the permissible storage losses under state laws, the Tribunal found merit in the appellant's argument.

6. Citing previous judgments, the Tribunal emphasized the natural losses inherent to rectified spirit and the need for a similar benefit as allowed for molasses under state laws. The Tribunal disagreed with the Revenue's reliance on previous cases involving different factual backgrounds.

7. Ultimately, the Tribunal allowed the appeal, setting aside the orders related to the reversal of cenvat credit on rectified spirit. The Tribunal upheld the appellant's claim that the loss in quantity of rectified spirit should be considered as wastage, in line with the nature of the product.

In conclusion, the Tribunal ruled in favor of the appellant, recognizing the natural losses incurred by rectified spirit during storage and allowing the claim for reversal of cenvat credit on the lost quantity. The judgment highlighted the need to consider the specific characteristics of the product and applicable state laws in determining the treatment of storage losses under the Central Excise Law.