2003 (11) TMI 248 - AT - Central Excise

Summary

Issues:
1. Confirmation of duty demand and imposition of personal penalty based on rejection of Modvat credit.
2. Identification of material handling losses within the factory.
3. Interpretation of permissible storage and processing loss.
4. Consideration of invisible losses as waste under Rule 57D.
5. Challenge on the point of limitation.
6. Admissibility of Modvat credit on material handling losses.

Analysis:

1. The judgment involves the confirmation of duty demand and the imposition of a personal penalty against the appellant company due to the rejection of Modvat credit. The Commissioner confirmed the demand of duty amounting to Rs. 52,88,112.00 by relying on a report by Tata Consultancy Services, which identified material handling losses during the manufacturing process of the final product. The appellant argued that the losses were invisible and appointed experts to suggest measures for reducing them.

2. Various material handling losses within the factory were identified in the report, including spillage of aluminum powder, accumulation of material at transfer points, evaporation loss in the melter, and leakage losses from transfer pumps. The report also estimated losses due to spillage and airborne particles between different stages of the process, such as unloading wagons and transferring materials to silos.

3. The appellant cited a Board's Circular to argue that the estimated percentage of loss for each input was below 1%, which falls within the permissible limit for storage and processing losses. They contended that the losses identified were invisible and should be considered as waste under Rule 57D, supported by precedents from the Tribunal.

4. The appellant's contention was that despite receiving the full quantity of inputs as per invoices, the identified losses were invisible and should be treated as waste, making them eligible for Modvat credit under Rule 57D. They relied on previous Tribunal decisions to support their argument.

5. The challenge on the point of limitation was raised in response to the demand, indicating a procedural aspect contested by the appellant.

6. The Tribunal, in its analysis, referred to previous judgments where Modvat credit was allowed for losses within the factory due to factors like natural loss during processing and handling. Considering the material handling losses as invisible and not justifying the rejection of Modvat credit, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants.