TMI Blog2013 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... where the excavated contents were being transported from mines to the factory, and where the contents were susceptible to dryage due to atmospheric conditions apart from the likelihood of some slight error in recording of measurements due to human or mechanical error. Thus, the principles available in the rules and in the law explained by this Court are clear that credit of duty cannot be denied or varied where input has become waste in or in relation to manufacture of final product, and more of practical approach is required to be taken in these matters. Unable to find any evidence on record on the part of the appellant that he had, in any manner, diverted the duty paid inputs with intent to evade duty. Hence, there does not appear any basis to consider it to be a case of “wilful suppression of facts”. The shortage had been of about 0.05% and factors as indicated by the assessee about some difference in the weighing scale or of the human error and of the loss in transit due to drying of moisture contents cannot be ignored altogether - unable to find any basis for the Adjudicating Authority’s observations about pilferage or theft having occurred during transit. The order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resulting in minor difference in the quantity. Not satisfied with the explanation, the department issued a show cause notice on 27.08.2001 to the assessee proposing recovery of Modvat credit amounting to Rs.5,62,417/- under Section 11A(1) of the Act of 1944 read with erstwhile Rules 57I and 57AH of the Central Excise Rules of 1944 ( the Rules of 1944 ) and Rule 12 of the Cenvat Credit Rules, 2001. The department also proposed to levy penalty and to recover interest. It was essentially alleged in the notice that the assessee had wrongly availed Modvat credit on the quantity of raw material, which was not received in the factory and not utilized in the manufacture of finished product; and the assessee wilfully suppressed the facts regarding transit losses of modvatable inputs and disclosed the facts to the department only when asked for. It was alleged that the assessee had, inter alia, contravened the provisions of Rules 57A, 57G and 57AB of the Rules of 1944. After submission of the reply to show cause notice and hearing the assessee, the Adjudicating Authority, in its order dated 31.12.2001 recorded dissatisfaction over the suggestions made by the assessee and while rejecting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon, M/s. Hindustan Zinc Ltd. had been procuring lead and zinc concentrates from their own mines located at different places such as Jawar, Agucha etc. from where it was cleared on payment of duty and they took credit on duty so paid. The loss of concentrate which had taken place in the factory was detected in the annual stock taking and they accounted for the shortage found during stock taking at the end of each financial year by writing off these losses. The percentage of the shortage found was less than 1.5% on an average for the years 1997-98, 1998-99, 1999-2000 2000-01 which was found to be reasonable loss during the process of manufacture by the Hon ble Tribunal, and it was held that duty cannot be demanded on the inputs which were lost during the process of manufacture. 9. I find that the above case law is squarely applicable on the present appeal as the losses of the appellants are less than 0.05% during the subject period. Therefore, following the ratio of the decision of the Hon ble Tribunal cited in the foregoing para, I hold that disallowance of the Modvat/Cenvat credit of Rs.5,62,417/- on the quantity of raw material detected short by the appellants during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid, it is contended on behalf of the appellant-revenue that as per the admission of the respondent-assessee, whatever was the loss to the goods that had actually occurred prior to their receipt in the factory and, therefore, the Modvat credit on the quantity of the inputs, which were not received in the factory and had not been used in the manufacture of the final product, could not have been allowed to the assessee. It is also submitted that the facts of the present case, on material particulars, are different from the case relied upon by the Tribunal inasmuch as in the referred case, the fact was not in dispute that the inputs were received in the factory and, thereafter, credit was taken whereas, in the present case, the inputs were not received in the factory and were not utilized in the manufacture of the final product. It is also submitted that when the concentrates were transported to a distance of about 80 to 100 Kms from the mines to the smelter plant in dumpers by road, the contention of the assessee about loss due to natural drying of moisture content could not be considered correct because in the transportation over such a small distance, so much of quantity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retched in the manner, and to the extent, as the learned counsel for the appellant wanted us to, probably, no loss or destruction, would fall in either of these clauses, obviously, because in either case, grounds may be projected, on the anvil of requirement of appropriate storage, or safety measures, and so on and so forth. Even in cases of unavoidable accident it can always be contended, that the accident could be avoided by taking recourse of one or more measures. Thus, a bit liberal rather more practical approach is required to be taken in the matter. Of course, we quiet agree with the learned counsel, that mere accounting practice of the assessee, could not be considered for granting remission, under Rule 21, rather, only requirement of Rule 21 is, that the concerned authority should be satisfied that goods have been lost or destroyed, by natural causes or by unavoidable accident . 13. Then in very nature of things, contemplated by Rule 21, the aspect of satisfaction, about the destruction or loss of goods, by natural causes or unavoidable accident, is essentially a subjective satisfaction of the authority concerned, and that having been recorded by the learned Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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