2010 (9) TMI 1020 - AT - Central Excise

Assessee wins appeal on liability for pilferage of rectified spirit. Tribunal grants exemption, citing fairness and legal principles.

The Tribunal allowed the appeal of the assessee in a case concerning liability for payment due to pilferage of rectified spirit during storage. ... - Issues:1. Liability for payment due to pilferage of rectified spirit during storage.Analysis:The primary issue in this appeal revolves around the liability for payment arising from the disappearance of rectified spirit, termed as Refined Alcohol, during storage due to its volatile nature. The contention arises from the Modvat credit claimed by the assessee on molasses, where the possibility of denatured spirit being subject to volatility by its chemical properties is debated. The assessee argues that imposing a levy of 8% on the pilfered quantity would lead to absurdity if the permissible volatility inherent in the nature of the spirit is considered.The learned counsel for the assessee highlights the permissibility under the statute and the absence of a specific order from the Board to address evaporation concerns. On the other hand, the Revenue asserts that the responsibility to account for Ethyl Alcohol, leading to denatured spirit and subsequent excisability, falls on the assessee. The Revenue contends that the claim of pilferage resulted in a revenue loss, justifying the imposition of an 8% levy. Moreover, the Revenue argues against allowing any percentage adjustment as mandated by law.Upon hearing both parties, the Tribunal acknowledges the volatile nature of the goods in question, recognizing the inherent volatility of the spirit due to its chemical properties. The Tribunal emphasizes that if pilferage is not intentional or man-made, legal constructs should not impede justice. In pursuit of justice and considering the peculiar nature of the goods, the Tribunal deems it appropriate to allow a negligible quantity exemption from the levy, resulting in a demand of Rs. 93,312.Furthermore, the Tribunal references a previous decision by the Larger Bench regarding transition losses of inputs, distinguishing between losses attributable to the assessee and those beyond their control. Following the precedent set in the case of C.C.E., Chennai v. Bhuwalka Steel Industries Ltd., the Tribunal asserts that natural losses beyond the assessee's control should not lead to injustice. Consequently, the Tribunal allows the appeal of the assessee based on the principles established in the aforementioned decision.In conclusion, the judgment delves into the complexities surrounding the liability for pilferage of rectified spirit during storage, addressing the nuances of permissible volatility, revenue loss, and the application of legal principles to ensure fairness and justice in the determination of payment obligations.