TMI Blog2014 (10) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, the direction, which is impugned by the respondent, namely, to reverse the credit and imposition of the penalty and the interest for the failure to do so, cannot be complained of. Merely because it is not cleared for the reason that it cannot be cleared does not mean that the manufacture did not take place. The credit standing to the account of duty paid molasses used for the purpose of producing the non-dutiable final product necessarily must be proportionately reduced. The danger of the party using it for other purposes as highlighted by the Commissioner cannot be overlooked by us - Decided in favour of Revenue. - Central Excise Appeal No. 2 of 2010, Central Excise Appeal No. 6 of 2010 - - - Dated:- 26-8-2014 - K. M. Joseph, CJ And Sudhanshu Dhulia,JJ . For the Petitioner : Mr. Shobhit Saharia For the Respondent : Ms. Puja Banga JUDGMENT K. M. Joseph,CJ (Oral) These appeals being inter-connected, we are disposing of the same by this common judgment. We treat Central Excise Appeal No. 2 of 2010 as the leading case. 2. These appeals are maintained under Section 36G of the Central Excise Act. The following is the substantial question of law: Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the impugned order was confirmed. It was in further appeal by the respondent that the Tribunal interfered with the matter by the impugned order and, hence, the appeals. 4. We have heard Mr. Shobhit Saharia, learned counsel for the appellant and Ms. Puja Banga, learned counsel for the respondent. 5. It is necessary to notice the reasoning of the Tribunal. Relevant paras 4 to 6 are being reproduced as under: 4. After hearing both the sides and on perusal of the records, there is no dispute that the duty paid inputs used in the manufacture of exempted goods viz. Rectified Spirit. It is also a fact that the Rectified Spirit evaporated during storage at the appellants premises. The Commissioner (Appeals) observed that the basic principle of Cenvat credit Rules is admissibility of credit on inputs for the manufacture of goods, which are dutiable and not for the clearances of goods. The contention of the appellant is that the loss is 0.4%, which is within the permissible limit as settled by the State Excise Authority. Find that the Tribunal in the appellants own case for earlier period in the case of Bajpur Cooperative Sugar Factory Ltd. (supra) allowed the appeal. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. rectified spirit, some loss of quality is bound to occur as a natural phenomenon. The case of the appellant that it was entitled to count the loss 42,524.9 BL spirit as wastage was in accordance with law and the authorities below committed error in rejecting the same, and the impugned orders so far as they relate to utilization of credit of ₹ 1,06,312/- involved in the clearance of 42,524.9 BL rectified spirit are accordingly set aside. 6. It is seen that the Tribunal consistently observed that the losses of Rectified Spirit in storage are natural losses and credit cannot be denied within the permissible limit of 0.5% as settled by the State Excise Department. In the present case, credit was denied on loss of 0.4%. 6. The learned counsel for the appellant would submit that the Tribunal has clearly erred in applying on the practice under the State Excise laws in the matter of making allowance for the wastage. He would remind us that the case arose under the CENVAT Credit Rules. He would submit that, as far as the rectified spirit is concerned, it attracts NIL duty. He would further draw our attention to the definition of exempted goods under the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit. It matters little that, after the manufacture, there is wastage or loss. It matters little that whether, after the manufacture, it reaches the factory gate and it is cleared. What is important is that manufacture took place. If manufacture of final product, which is not dutiable, takes place with the aid of raw material, which is duty paid, then the respondent cannot claim the benefit of CENVAT credit. 8. Per contra, the learned counsel for the respondent would, first of all, point out that the Court may refuse to consider these appeals on merits. This is for the reason that the orders were passed by the Tribunal for three different periods. The Department, though filed an appeal against the order of the Tribunal, being CEXA No.5 of 2008, in respect of one of the periods, wherein common question arose, it did not pursue the matter and it is dismissed in default. Next, she would support the order of the Tribunal. The learned counsel for the respondent, understandably relying on the provisions contained in Rule 6(3), would submit that, unless there is actual clearance of the goods, there can be no question of reversal of credit and, therefore, would submit that the wastage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harashtra v. Digambar and in State of W.B. v. Debdas Kumar had held that though an appeal was not filed against an earlier order, when public interest is involved in interpretation of law, the Court is entitled to go into the question. 10. Therefore, it is submitted that the Court may consider the matter on merits. We are also inclined to think that the fact that, for one period, the appeal was though filed and though the restoration was ordered on payment of cost and cost could not be paid and, therefore, the order rejecting the appeal holds good; but that should not bar the appellant from urging us to consider these appeals on merits. 11. The learned counsel for the appellant argued that only the stage at which the reversal is to take place is when there is removal and the same is alone what is contemplated under Rule 6(3) and that does not mean that, if, after manufacture, there is wastage, the party will be able to get CENVAT credit. 12. As regards the merits of the matter, it may be true that the final goods, in this case rectified spirit, have been lost by evaporation. Here, we are not concerned with the case under the State Excise law. Here, we are concerned spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause to interfere with the orders of the adjudicating authority. 13. We would think that the reasoning therein appears to us to be correct. Therefore, we would think that, under the scheme, when admittedly duty paid molasses have been used for the manufacture of rectified spirit for which a formula has been deployed by the authorities; we can proceed on the basis that a particular quantity of duty paid molasses is used for the manufacture of the final product, which, because it is not dutiable, respondent becomes disentitled to claim CENVAT credit on the same. In such circumstances, the direction, which is impugned by the respondent, namely, to reverse the credit and imposition of the penalty and the interest for the failure to do so, cannot be complained of. Merely because it is not cleared for the reason that it cannot be cleared does not mean that the manufacture did not take place. The credit standing to the account of duty paid molasses used for the purpose of producing the non-dutiable final product necessarily must be proportionately reduced. The danger of the party using it for other purposes as highlighted by the Commissioner cannot be overlooked by us. 14. In suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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