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TMI Blog2017 (2) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... here was an inspection in the unit DSM chemical owned by DSM Ltd on 10 November, 2005, verification of stock of some finished goods as well as raw material was done, and the following discrepancy/variation was found: - Name of the Commodity Qty. found in stock in kg./litres Qty. as per RG-1 Register Days production as per production slip Total stock as per their records Diff. In Qty. Acetic Acid 58755.167 58490 0 58490 (+) 265.167 (say 265) Acetic Anhydride 14936.067 14035 831 14866 (+) 70.067 (say 70) Acetaldehyde 68094 65155 0 65155 (+) 2939 3. Statement of Mr. Chandra Prakash Singh the General Manager of the unit was taken under Section 14 of the Act, wherein he stated that in respect of Acetic Acid and Acetic Anhydride, the difference was mainly due to temperature variance at the time of stock taking. In respect of Acetaldehyde he accepted that 2939 kgs was excess in stock. However, no reason had been given by him for such excess stock. Such excess stock as aforementioned, was valued at Rs. 95,046/- involving duty of Rs. 15,512/- and the same was seized. 4. Further stock taking of finished goods as well as some raw materials were also conducted on 10.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to pay under the Provisions of Rule 6(3)(a)(i) of CCR the proportionate amount attributable to the credit involved on the inputs/input services (molasses) used in the manufacture of Rectified Spirit cleared or sold at nil rate of duty. It further appeared that major part of the Rectified Spirit is used in manufacture of dutiable goods while a small part is cleared or sold at nil rate of duty. It further appeared that the appellant have procured molasses from various sugar units. The molasses were being stored in five tanks in the unit and Cenvat Credit was availed on the entire quantity of molasses received/procured. Cenvat Credit so availed being utilized by the appellant towards payment of duty on the clearance of finished goods or towards payment under Rule 6(3)(a)(i) of CCR, 2004. It further appeared that appellant while preparing the summary for the month of March 2005 of the RG 23 Pt. I register purposely bifurcated the said quantity of molasses in two parts, that is molasses used for Potable Alcohol and molasses used for Captive Alcohol. It appeared that molasses used for Potable Alcohol means molasses being used in the manufacture of 'Rectified Spirit' which can either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil rate of duty. On scrutiny of documents further reveals that appellant have received molasses from DSM, Kashipur, wherein no duty was being paid on such molasses. In order to show separate inventory appellant had maintained receipt and consumption of the said molasses in RG 23A Part-1 Register (page no.1 to 18 of RUD-3) separately. It have been shown therein that with effect from 03 June, 2005 only the said exempted molasses have been used by them in manufacture of rectified spirit sold at nil rate of duty. It appeared to Revenue that since appellant was not utilising said exempted molasses exclusively for the manufactured of rectified spirit, which have been sold or cleared by them at nil rate of duty, it appeared that they were doing the same. In order to avoid payment under Rule 6(3)(a)(i) of CCR, 2004. it also appeared that: - (i) Appellant were not manufacturing rectified spirit kept separately for clearing at nil rate of duty, (ii) Appellant were not storing rectified spirit cleared at nil rate of duty separately. (iii) Appellant could not store molasses of above two categories separately. 7. It further appeared that the main purpose of the appellant by bifurcating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he stated that rectified spirit was produced and stored commonly. It further appeared that appellant was required to pay the amount attributable to Cenvat Credit involved on the quantity of molasses used in manufacture of rectified spirit sold as such at nil rate of duty under Rule 6(3)(a)(i) of CCR, 2004 for the said purpose of quantification of involvement of Cenvat Credit on the quantity of rectified spirit sold at nil rate of duty from time to time. It appeared to Revenue that the justified method was FIFO (First In First Out) was required to be adopted. The receipt and consumption of molasses was worked out as follows:- (a) Receipt of Molasses and rate of duty applicable S.No. Rate of applicable Qty. in Qtls. Month/date 1. @ 500 PMT i.e. Rs. 50/- per quintal 298503.87 (C.B. on 28.02.2005) 2. @ 1000 PMT i.e. Rs. 50/- per quintal 165913 75232.90 11188.30 (March-05) (April-05) (upto 07.05.05) 252334.20 TOTAL (b) Consumption of Molasses so procured. (i) Related to Molasses procured @ Rs. 500/- PMT i.e. 298503.87 qtls. S.No. Month/date Consumption Closing Balance 1. Upto 28.02.05 4447.40 (Transferred/Diverted to M/s DSSL)* 294056.47 2. March-05 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts by using sugar and molasses and other raw materials. It was also noticed that appellant had also availed Cenvat Credit on the said molasses which was diverted by them to DSSL and the said transfer was done by appellant without reversal of credit. As per Rule 3 and 4 of CCR, 2004 appellant was required to reverse the amount of Cenvat Credit involved on the said 25,964.50 Qtls. of molasses. The total Cenvat Credit involved was worked out at Rs. 20,29,755/- as per the register which was resumed at Sr. No. 25 of Annexure B to the Panchnama. The said register have been named as 'Invertose Sheera'. It also appeared that the old name of M/s DSSL was M/s Dhampur Invertose Ltd and so the said Invertose Sheera appeared to be the molasses pertaining to M/s DSSL. Statement of one of Shri Avdhesh Kumar, Assistant Manager (Commercial) of appellant was recorded from which it appeared that appellant had diverted 25964.50 Qtls. of molasses to M/s DSSL without following proper procedure and availed the Cenvat Credit of Rs. 20,29,755/- towards payment of duty on other goods manufactured and cleared by them. Such diverted quantity of molasses to M/s DSSL was not shown in their RG 23 A Part-1re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rectified spirit cleared at nil rate of duty under Rule 14 of CCR, 2004 read with Section 11 A of the Act was confirmed. Further, allowing appropriation of Rs. 20,27,790/-. There was balance demand remaining Rs. 5,21,161/-. Further penalty was Rs. 5,21,161/- was imposed under Rule 15 of CCR, 2004 read with Section 11 AC of the Act. Further, the proposed amount of Rs. 20,29,755/- involved on molasses transferred to M/s DSSL were disallowed under Rule 14 of CCR and further equal amount of penalty was imposed under Rule 15 of CCR read with section 11 AC of the Act. Being aggrieved the appellant preferred appeal before learned Commissioner (Appeals) who vide the impugned Order-in-Appeal dated 30 December, 2008 was pleased to dispose of the cross appeals arising from the common Order-in-Original. The appellant assessee had challenged the Order-in-Original as regards all the demands raised along with penalty and redemption fine, whereas the Revenue is in appeal on short levy or non-levy of penalty under Section 11 AC on the contention that the Order-in-Original have confirmed/demand of duty amounting to Rs. 25,48,951/- involved on the molasses used in the manufacture of rectified spi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 3(5) of CCR read with Rule 9 it was held that duty of Rs. 20,29,755/- is rightly demanded. As regards the Revenue appeal, the learned Commissioner has observed that the preventive officers detected the violations in the course of investigation, wherein the appellant deposited Rs. 12,323/- against due amount of Rs. 13,087/-. The appellant had not deducted the levy, on its own. So they had not reversed themselves under intimation to the Department. Accordingly, the appeal of the appellant assessee was dismissed and the appeal of Revenue was allowed and accordingly, penalty on shortage Rs. 13,087/- was confirmed along with penalty of Rs. 25,48,951/- on the molasses used for manufacture of rectified spirit (cleared duty-free). 15. Being aggrieved the appellant assessee is before this Tribunal. The learned counsel for the appellants submitted that molasses were used for manufacture of rectified spirit. They received molasses from three categories, namely, first received on payment of duty, second one comes from a unit which is availing area based exemption and the third category is the molasses manufactured by the unit themselves. These are stored in five tanks, and as per Rule 6 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . MF - 6. Thus, it is the case of only venial breach of the provisions of Rule 8 of CCR, whether the duty can be demanded under Rule 3(5) of CCR, which provides for payment of duty, when inputs on which Cenvat Credit is taken, are removed as such. Such facts are not obtaining in the facts and circumstances and as such the demand of Rs. 20,29,755/- is fit to be set aside. So far the confirmation of duty and confiscation for the discrepancy and shortage or excess found, at the time of inspection, the learned counsel demonstrated that such difference and/or discrepancy is less than 10% and in some cases, even less than 5%. Further, the cogent explanation given for the shortage or difference was not found untrue and the order of confiscation and demand of duty on such nominal variation in the stock have been done mechanically, and is fit to be set aside. 16. The learned AR for Revenue submitted that in view of the fact that the molasses attracted different rates of duty during the period, the method followed by the appellant for reversal of credit on proportionate basis has resulted in loss of Revenue and the correct method to be followed was only the FIFO method. He submitted the dut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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