2011 (6) TMI 629 - AT - Central Excise

Cenvat credit - credit on molasses on the quantity shown in the invoices which is more than the actual receipt of the molasses - variation is 0.87% - Held that - loss of molasses is within the permissible of 1% as per Bombay Molasses Rules, 1955 and the respondents are entitled to take the credit as per the quantity shown in the invoices, as the loss of molasses is within the permissible limit, Appeal filed by the Revenue is dismissed

Summary

Issues:
- Appeal against allowance of claim of shortage of molasses in transportation
- Entitlement of credit on quantity shown in invoices despite actual receipt being less
- Interpretation of relevant Circular and Bombay Molasses Rules
- Permissibility of variation in quantity during transit

Analysis:

1. Appeal against allowance of claim of shortage of molasses in transportation:
The case involved an appeal by the Revenue against an order where the Commissioner (Appeals) had allowed the claim of the respondent regarding the shortage of molasses during transportation to their factory. The Revenue contended that the excess CENVAT credit taken by the respondent due to the shortage should be reversed. The Tribunal was tasked with determining the validity of the appeal.

2. Entitlement of credit on quantity shown in invoices despite actual receipt being less:
The respondents, manufacturers of organic chemicals, availed credit on molasses used in manufacturing their final product. Despite receiving less quantity of molasses than mentioned in the invoices, the respondents had claimed credit on the full quantity. The main issue was whether credit could be availed based on the invoice quantity even when the actual receipt was lower.

3. Interpretation of relevant Circular and Bombay Molasses Rules:
The Revenue argued that the Circular allowing storage losses up to 2% did not apply in this case as it was a matter of transit loss, not storage loss. On the other hand, the respondents cited the Bombay Molasses Rules, 1955, which permitted losses during transportation within a certain limit. The interpretation of these regulations was crucial in determining the validity of the credit claimed.

4. Permissibility of variation in quantity during transit:
The Tribunal considered the permissible variation in quantity during transit, with the Revenue contending that credit should only be given for the actual receipt quantity. However, the respondents relied on precedents and guidelines, including a decision by a Larger Bench, to support their claim that losses during transit due to natural causes should be considered within permissible limits for credit.

In the end, the Tribunal found that the loss of molasses was within the permissible limit of 1% as per the Bombay Molasses Rules, 1955. Citing precedent and guidelines, the Tribunal upheld the decision of the Commissioner (Appeals) to allow the credit claimed by the respondents. The appeal filed by the Revenue was dismissed, and the impugned order was upheld based on the permissible variation in quantity during transit and the applicable regulations and precedents.