2000 (12) TMI 191 - AT - Central Excise

Summary

Issues involved:
The issues involved in this case are the denial of Modvat credit on the basis of alleged loss of inputs, the applicability of Rule 57D to cover the wastage of inputs, and the challenge against the demand of duty on grounds of limitation.

Summary:

Denial of Modvat Credit:
The appellants, a public sector undertaking engaged in refining and marketing petroleum products, faced a show cause notice alleging a loss of inputs during manufacturing. The notice proposed to recover excess credit towards loss of inputs under Rule 57A read with Rule 57-I(1)(ii). The Commissioner confirmed the demand of duty and imposed a penalty, rejecting the appellants' contentions.

Applicability of Rule 57D:
The appellants argued that the wastage of base oil was not as high as alleged in the notice, contending that the loss was only around 1% based on their records. They asserted that the losses were covered by Rule 57D, which widened its scope to include inputs lost "in or in relation to the manufacture of the final product." The Tribunal agreed that the wastage occurring from tank discharge to the reaction kettle fell within the ambit of Rule 57D.

Challenge on Grounds of Limitation:
The demand of duty was also challenged on the basis of limitation. The appellants maintained that they regularly maintained records and that the longer period of limitation invoked against them was unjustified. The Tribunal held that the demand was indeed barred by limitation, as the wastage could not have been reflected in the records as per RG-23A Part-I.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeal on both merits and limitation grounds. Since the demand was overturned, there was no need for the imposition of personal penalties or recovery of interest against the appellants.