1996 (9) TMI 415 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit on lost molasses during storage.
2. Interpretation of Rule 57A and Board's Circular No. 261/15/82-CX. 8.
3. Time-barred demands and calculation basis of duty.
4. Distinction between duty paid molasses and non-duty molasses storage losses.
5. Recalculation of duty liability for different types of molasses.

Analysis:

The judgment dealt with the issue of the admissibility of Modvat credit on lost molasses during storage. The respondents had availed irregular credit of excise duty under Modvat for molasses lost during storage, which the jurisdictional Assistant Commissioner disallowed. The Commissioner (Appeals) vacated the order-in-original, citing natural losses during storage. However, the tribunal found the Commissioner's order improper as the party did not use the molasses in the final product, as required by Rule 57A.

Regarding the interpretation of Rule 57A and Board's Circular No. 261/15/82-CX. 8, the tribunal noted that the circular pertained to non-duty paid goods, not duty paid inputs under Rule 57A. The tribunal agreed with the department's contention that the storage loss of duty paid molasses should not be condoned under the circular.

The judgment also addressed the time-barred demands and calculation basis of duty. The tribunal found that the demand was partly time-barred as the respondents had submitted accounts of storage loss in April and May 1994, making the demand beyond the normal period. The tribunal ordered a re-calculation of the duty liability based on the comments received from the Assistant Commissioner.

Moreover, the tribunal discussed the distinction between duty paid molasses and non-duty molasses storage losses. It emphasized the difference in treatment between duty paid molasses under Rule 57A and non-duty molasses under Rule 49, highlighting the issue of duty realization on unutilized quantity.

Lastly, the judgment addressed the recalculation of duty liability for different types of molasses. The tribunal agreed with the counsels that the department had mistakenly calculated the demand based on the higher value of the two types of molasses. It directed a re-calculation of the duty liability for both types of molasses, considering the actual or average value for accurate assessment.