Dhampur Sugar Mills Ltd vs Cce, Meerut-Ii

[Arising out of Order-in-Appeal No.142-CE/MRT-II/2008 dated 28.11.2008 passed by the Commissioner (Appeals), Meerut].

For approval and signature:

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

__________________________________________________

Dhampur Sugar Mills Ltd. Appellant

Vs.

CCE, Meerut-II  Respondent

Present for the Appellant : Shri.Alok Arora, Advocate

Present for the Respondent: Shri. R.K. Mishra, DR

Coram:HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 02/06/2015

Final ORDER NO. 53274/2015

PER: S.K. MONANTY

The appellant is engaged in manufacture of sugar and chemicals. During the course of manufacture of sugar, the by-product namely, molasses emerges, which is used captively for manufacture of the chemical goods. The sugar and chemical units of the appellant are separately registered with the Central Excise Department. During the disputed period, the appellant had removed molasses from the sugar factory to the Kachcha pit situated outside the factory premises. The said removal had been effected through invoices, on payment of appropriate Central Excise Duty. Subsequently, the said molasses were removed from the kachcha pit to the chemical unit under the cover of the bills raised by the appellant. The chemical unit of the appellant had taken modvat credit of Central Excise Duty paid on such molasses. Taking of Modvat credit on the strength of bills was objected by the Central Excise Department on the ground that the same is not prescribed document for taking credit. Further, on account of shortage of 102.90 quintals of molasses, modvat credit has been denied to the appellant. In appeal against the adjudication order, the Commissioner (Appeals) has upheld denial of Modvat credit. Hence, the present appeal before this Tribunal.

2. Ld. Advocate Shri Alok Arora appearing for the appellant submits that both the sugar and the chemical units are belonging to the appellants company and the Central Excise duty paid on molasses at the sugar unit was taken as modvat credit in the chemical unit. He further submits that the disputed goods have not been diverted for any other purpose, since the appellant is covered under the physical control system, where the books of accounts are under regular scrutiny by the State Excise Authorities. It is his further submission that the bills issued to the chemical unit reflected the Central Excise Duty originally paid through debit in the PLA. According to him, since the duty paid goods have been used in the manufacture of chemical goods in the other unit owned by the appellant and that the receipt and utilization of the said molasses have been duly accounted for in the books of accounts, the appellant is entitled for the benefits of Notification No.7/99-CE (N.T.) dated 09.02.1999 issued by the Central Government. To substantiate his above stand, the ld. Advocate relies on the judgment of Honble Allahabad High Court delivered in the case of Commissioner of Central Excise, Allahabad vs. Hindalco Industries Ltd., reported in 2013 (293) ELT 208 (All.). With regard to shortage of molasses, the ld. Advocate submits that by nature of use of such goods, negligible quantum of loss is inevitable, for which denial of Modvat benefit is not justified. He relies on the Larger Bench decision of this Tribunal in the case of CCE, Chennai vs. Bhuwalka Steel Industries Ltd., reported in 2010 (249) ELT 218 (Tri. LB)

3. Per contra, the ld. DR appearing for the respondent submits that the erstwhile Central Excise Rules clearly provides that Modvat credit should be taken based on the invoice issued by the manufacturer. According to him, since the credit has been taken on the strength of the bill, which is not prescribed as valid document under Rule 52A of the rules, the appellant is not entitled for the credit.

4. I have heard the ld. Counsels for both the sides and perused the records.

5. Receipt of the disputed input i.e. molasses in the chemical unit of the appellant and their use within the factory for the intended purpose have not been disputed either in the adjudication order or in the impugned order. However, the cenvat credit has been denied on the sole ground that the bill issued from the kachcha pit to the chemical unit is not a proper/ valid document prescribed under Rule 52A of the erstwhile Central Excise Rules, 1944 read with 57G for taking the modvat credit.

6. I find that the Notification dated 09.02.1999 issued by the Central Government has not been considered in proper prospective by the authorities below while denying the modvat benefit to the appellant. According to the said Notification, the modvat benefit shall not be denied, if the duty paid character of the input and its receipt and utilization in the factory for the intended purpose is not in dispute. In the circumstance of the present case, since the original authority has not carried out proper exercise, I am of the view that the matter should be remanded back to the jurisdictional Assistant/Dy. Commissioner of Central Excise, who shall verify the documents as provided under the said Notification and if maintenance of such documents are in conformity with the requirement of the said Notification, the Modvat benefit should be allowed to the appellant.

7. With regard to shortage of molasses, I find that the quantum of shortage/loss is negligible in comparison with the total material handled by the appellant. Thus, negligible difference due to various factors should be ignored and full credit should be allowed to the appellant. Therefore, I am of the view that the impugned order, denying Modvat credit to the appellant is not proper in the eyes of law.

8. The appeal is disposed of in above terms.

[Dictated & Pronounced in the open Court].

(S.K.MOHANTY)

MEMBER (JUDICIAL)

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