2004 (5) TMI 486 - AT - Central Excise

Tribunal grants appellant full Modvat credit for lost molasses, criticizes procedural violation

The Tribunal ruled in favor of the appellant, a manufacturer facing duty demand due to lost molasses during storage, allowing Modvat credit on the full ... Cenvat/Modvat on inputs - Molasses - Natural justice - Demand Issues:1. Modvat credit on lost molasses.2. Violation of statutory right to file appeal and obtain stay of recovery.Modvat credit on lost molasses:The appellant, a manufacturer of various products with molasses as the main input, faced a demand for duty due to the loss of molasses during storage. The Central Excise authorities contended that the lost molasses were not used in the manufacture of the final product, thus disallowing Modvat credit on those quantities. The appellant relied on a previous Tribunal case and a Supreme Court decision where it was held that the assessee is eligible for credit on the full quantity of input, including the lost molasses. The Tribunal noted a circular accepting a normal loss of up to 2% during storage, which supported the appellant's claim. After reviewing the records and submissions, the Tribunal found in favor of the assessee, setting aside the demand and penalty imposed by the impugned order.Violation of statutory right to file appeal and obtain stay of recovery:The Tribunal highlighted a serious procedural violation by the lower authorities, who adjusted a significant part of the demand amount from rebate claims before the expiry of the statutory time limit for filing an appeal against the impugned order. This adjustment infringed upon the appellant's statutory right to file an appeal and seek a stay of recovery. The recovery was made before the appellant even received the impugned order, leading to a clear breach of the statutory timeline for filing an appeal. The Tribunal strongly condemned this high-handed action, directing the immediate return of the recovered amount to the appellant within two weeks from the receipt of the order to rectify the violation of the appellant's rights.