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2012 (9) TMI 872 - AT - Central ExciseDuty demand - Shortage in inputs - During investigation of premises of Assessee on persuasion of the department, the Assessee paid a sum of Rs. 3,67,500 - After investigation was complete, the respondent filed a refund claim - Commissioner (Appeals) held that shortage found in the factory at the time of investigation are none other than process loss and sanctioned refund claim - Held that:- The variations in shortage have not been properly investigated by the Revenue. There is no evidence to substantiate that these raw materials had been cleared clandestinely. On the contrary there appears force in Appellants’ contention that there was processing loss during the manufacturing of final product. Further the appellants invited the attention towards photocopy of the relevant pages of Encyclopaedia of polymers Science and Engineering (Vol. 4). In support of their contention that polypropylene was susceptible to losses, degradation when subjected to heating. Thus cent percent recovery of Polypropylene was not possible in making P.P. Films therefrom. In any case the percentage loss of raw material consumption has been of the order of 0.415%, 0.223% and 1.057% in the year 1993-94, 1994-95 & 1995-96 respectively. The total percentage loss in the three financial years has been only 0.612% i.e. even less than 1% which is quite insignificant. Appellants have been declaring such losses of raw material in the manufacturing process in their annual declarations filed in 3CD Forms to the Income Tax authorities during the years earlier to and after to the subject years. No demand of modvat credit involved on such loss of raw material consumption has since been raised by the department in respect of 3CD Form submitted by the Appellants in the years subsequent to the subject years. This point also goes in the Appellants’ favour. The Appellants have also explained the aspect of processing loss as deposed in the affidavit sworn on 25-9-2001 of Shri I.R. Balanagendran, the Executive (RND) of the Appellants. Attention is also invited attention towards the Board’s Circulars/letters dated 17-10-1986 and 15-1-1988 wherein the admissibility of modvat credit on the melting loss/Slag etc. has been clarified. In view of these Circulars it can be safely inferred that the credit of duty on inputs cannot be denied on the ground that the part of the input was contained in the waste and scrap which might even exempted from excise duty. Therefore, no modvat credit could have been disallowed to the appellants if the said credit was attributable to the inputs lost in the manufacturing process - Decided against Revenue.
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