M/S. Shakumbari Sugar & Allied ... vs C.C.E. & S.T. Meerut

Excise Appeal No. E/57845/2013-E[SM] [Arising out of Order-In-Appeal No. 14-CE/MRT-I/2013 dated: 25.02.2013 passed by CCE (Appeals) Meerut-I]

For approval and signature: Hon'ble 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?

M/s. Shakumbari Sugar & Allied Industries Ltd. ...Appellant

Vs. C.C.E. & S.T. Meerut Respondent

Appearance:

Mr. Aalok Arora, (Advocate) for the Appellant Mr. R. K. Mishra, DR for the Respondent

CORAM:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing/ Decision: 23.07.2015

Final Order No. 54248 /2015_ Per S K Mohanty:

Brief facts of the case are that the appellant is engaged in the manufacture of Sugar and Molasses, falling under Chapter 17 and 22 of the Central Excise Tariff Act, 1985. During the disputed period, the appellant had imported 1,00,000/- quintals of raw sugar on payment of appropriate duties of Customs. However, as against such imported sugar, the appellant had received only 98,107.55 quintals of raw sugar and the rest quantity was lost during transit. The appellant reversed the cenvat credit of Additional Duty of Customs (CVD) paid on the quantity of raw sugar lost in transit. The said imported raw sugar were sent for processing to the job workers upon compliance of the requirements of Rule 16A of the Central Excise Rules, 2002 read with the Circular dated 12.02.2010 issued by the CBEC. After processing of the raw sugar in the job workers place, 92.379 quintals were received in the factory of the appellant. Since cenvat credit of CVD on 98,107.55 quintals was taken by the appellant and the processed sugar received in the factory was only 92,379 quintals, the Department took the view that the cenvat credit is required to be reversed for the quantity of processed sugar not received back by the appellant. Subsequently, the appellant reversed the cenvat credit attributable to the shortage quantity of processed sugar not received in the factory. However, upon analysis of the legal provisions, the appellant entertained the belief that in case of process loss, no cenvat credit is required to be reversed, and accordingly, the appellant filed the refund application, claiming refund of such cenvat credit reversed on the quantity lost in process at the job workers premises. The Department initiated show cause proceedings for rejection of the refund application on the ground that the appellant is not entitled to take the cenvat benefit on the quantity of processed sugar not received in the factory. The SCN was adjudicated by rejecting the refund application. In appeal, the Ld. Commissioner (Appeals) vide the impugned order dated 25.02.2013 has upheld the adjudication order. Hence, this present appeal is before the Tribunal.

2. The short question involved in this appeal for consideration by this Tribunal is, as to whether, the appellant is required to reverse the cenvat credit on the quantity of finished goods short received in the factory from the job workers premises, which is attributable to the process loss at the factory of the job worker.

3. Sh. Aalok Arora, the Ld. Advocate for the appellant submits that Cenvat credit has been taken by the appellant on the quantity of raw sugar received in the factory under the cover of Bill of Entry. He submits that upon compliance of the procedure laid down by the CBEC circular dated 12.02.2010, the raw sugar were sent to the factory of the job worker for getting the white marketable sugar. According to him, since the cenvat credit has been taken on the basis of the quantity of raw sugar received in the factory, the same cannot be denied to the appellant in absence of any specific stipulation/ prohibition contained in the Cenvat Credit Rules, 2004. He further submits that the loss occurred during the course of processing at the job workers premises, cannot be the reason to deny the cenvat benefit and more particularly, the refund application filed by the applicant. The Ld. Advocate further submits that loss of sugar during the course of processing from raw to refine is a routine feature in the trade and to this effect, he has referred to the manufacturing report of another sugar manufacturer M/s Dhampur Sugar Mills Ltd. (ASMOLI), wherein the average recovery of sugar percentage of the raw sugar during the season 2009-2010 was to the tune of 97.17% and during the period 2008-2009, the percentage was 95.07%. To strengthen his said submissions, the Ld. Advocate has relied on the decisions of this Tribunal in the case of Commissioner of Central Excise, Chennai vs Bhuwalka Steel Industries Ltd. ,reported in 2010 (249) ELT 218 (Tri. LB), CCE Mumbai vs Bharat Radiators Ltd., reported in 2002 (148) ELT 1101 (Tri. Mum) and CCE vs Andhra Paper Mill Ltd., reported in 2011 (269) ELT 79 (AP).

4. Per contra, the Ld. DR Sh. RK Mishra appearing for the Respondent submits that the appellant had not submitted any records before the Central Excise Officers regarding the actual loss occurred during the process of raw sugar and the quantity of by-products generated during the process. He further submits that as per the agreement entered into between the appellant and the job worker, the quantum of process loss was agreed at 4% and any loss beyond this tolerance level was to be compensated by delivery of sugar. Thus, according to the Ld. DR, since the appellant got the compensation for the quantity loss occurred at the job workers premises, the cenvat benefit for the said compensated quantity shall not be available. It is his submissions that the appellant is not entitled for the refund claim, because the provisions of Rule 16 of the Central Excise Rules, 2002 have not been strictly followed while bringing back the processed sugar from the job workers premises. Therefore, he submits that the authorities below are justified in denying the refund benefit to the appellant.

5. I have heard the Ld. Counsel for both the sides and perused the records.

6. I find from the available records that the appellant availed the Cenvat credit with regard to the quantity of 98.107.55 quintals of raw sugar received in the factory. The fact is not in dispute that the said quantity of raw sugar has been transferred to the factory of the job worker for carrying out the process of getting the white marketable sugar and that during the course of processing, certain quantity of raw sugar were lost and only 92,379 quintals of white sugar were received in the factory of the appellant. Rule 3 of the Cenvat Credit Rules, 2004 permits a manufacturer to take cenvat credit of duties paid on the inputs received in the factory of manufacture of final product. Since Cenvat credit has been taken by the appellant on the quantity received, as indicated in the Bill of Entry, taking of such credit is in conformity with the requirement of Rule 3 ibid. No stipulation/ embargo has been created in the cenvat statute that in case of process loss happened at the factory of the job worker, the recipient/principal manufacturer is required to reverse the cenvat credit. In absence of any specific provisions contained in the statute, requiring the manufacturer to reverse the cenvat credit, in such an eventuality, I am of the view that the cenvat credit already reversed by the appellant before issuance of the SCN and subsequent claim of the said credit by way of filing of refund application, is the proper course of action taken by the appellant for restoring such credit.

Further Rule 4(5) (a) ibid provides for reversal of cenvat credit, in the possible event, where the goods have not been received from the job workers premises. The said provisions nowhere suggest that in case of process loss, the manufacturer is also required to reverse the cenvat credit. Thus, in absence of any specific stipulation being contained in the cenvat statute for reversing the cenvat credit attributable to the shortage in the quantity received in the factory on account of process loss, denial of cenvat benefit is not proper and is contrary to the statutory mandates. In this context, I find that this Tribunal in the case of Bharat Radiators (Supra) has held that cenvat credit cannot be denied for the loss of goods received back after processing from the job worker. The submissions of the Respondent that the appellant has not submitted any details regarding the actual loss during process of raw material, I find that the said submission is factually incorrect inasmuch as the Jurisdictional Superintendent at the job workers end vide his certificate dated 16.04.2010 has certified that the quantity of raw sugar received has been processed and the recovered quantity of white sugar has been stored in the factory premises of the job worker.

I find from the said certificate of the Superintendent that the quantity of raw sugar supplied by the appellant and the process sugar sent by the job worker has been reflected therein, which shows that the difference in the quantity is due to the process loss occurred at the job workers premises. Further submission of the Respondent that the appellant is not eligible for the benefit on account of the shortage quantity beyond 4% as agreed upon between the appellant and its job worker, I find that the Cenvat statute does not deal with such type of situation and is confined only to taking of cenvat credit on the quantity of inputs received in the factory. The observations of the Ld. Commissioner (Appeals) in the impugned order that the appellant has not complied with the requirements of Rule 16 ibid is not correct inasmuch as the appellant has complied with the conditions prescribed in the Circular issued by CBEC in terms of Rule 16(1). In this context, I find from the available records that the Jurisdictional Assistant Commissioner has granted the letter permission to the appellant for sending the goods to the job worker and has also prescribed the conditions therein, which have been duly complied with by the appellant.

7. In view of above, I am of the considered opinion that rejection of refund claim by the Authorities below is not legal and proper. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant with consequential benefit of refund.

(Dictated and pronounced in open court)

(S. K. Mohanty) Member(Judicial) Neha

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