2015 (4) TMI 1034 - AT - Central Excise

Tribunal upholds base oil receipt demand, sets aside penalty, directs payment.

M/s. Indian Oil Corporation Ltd. Versus Commissioner of Central Excise, Mumbai-II

The Tribunal upheld the demand for the short receipt of base oil within the normal limitation period, confirmed interest, set aside the penalty imposed ... Wrongful availment of CENVAT Credit - Credit availed on full goods mentioned in invoice however, received less goods - Held that:- Goods involved in the present case are lubricating base oil. Ld. Counsel for the appellant has produced copy of supplement to the manual of departmental instruction on excisable manufacture product. In the said manual different limit has been prescribed for different goods and different method of transfer etc. In the case of lubricating base oil the permissible limit is 0.1 %. We also note that Larger Bench of this Tribunal in the case of Bhuwalka Steel Industries Ltd(2009 (11) TMI 177 - CESTAT, CHENNAI [LB]) has gone into details of various factors to be considered while permitting various losses on their receipt of the goods for purpose of availment of Cenvat credit under Rule 3(1) of Cenvat Credit Rules. We also note that the Commissioner in the impugned order has taken note of such factors and discussed in detail the relevance or irrelevance of each of the five factors enumerated in the larger bench decision. In nutshell, the conclusion is that Cenvat credit availed and utilized on short receipt of base oil in excess of 0.1% is not permissible. We do not find any thing wrong in the said findings. - However, penalty is set aside - Decided partly in favour of assessee. Issues:1. Availment of Cenvat Credit on short receipt of base oil.2. Permissible limit for loss in case of base oil.3. Applicability of limits in relation to duty paid goods.4. Imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004.Issue 1: Availment of Cenvat Credit on short receipt of base oilThe case involved the appellant availing Cenvat Credit on base oil received in short quantity. The Revenue issued a show cause notice demanding duty for the short receipt of inputs. The Commissioner confirmed the demand for a specific period within the normal limitation period, along with interest and penalty under Rule 15(1) of Cenvat Credit Rules, 2004. The appellant challenged this order.Issue 2: Permissible limit for loss in case of base oilThe appellant contended that the permissible limit for loss in case of lubricated base oil should be 1%, citing precedents and the Larger Bench decision of the Tribunal. However, the Commissioner held that the permissible limit is 0.1% as per the Central Board of Excise and Customs instructions. The Tribunal agreed with the Commissioner's findings, stating that Cenvat credit on short receipt exceeding 0.1% is not permissible.Issue 3: Applicability of limits in relation to duty paid goodsThe appellant argued that the prescribed limits for loss in goods were applicable only to non-duty paid goods and not to duty paid goods. However, the Tribunal rejected this contention, emphasizing that the limits apply regardless of whether the goods are duty paid or non-duty paid, based on the nature of the goods. The Tribunal upheld the Commissioner's decision on the applicability of the limits.Issue 4: Imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004Regarding the penalty imposed under Rule 15(1) of Cenvat Credit Rules, 2004, the Tribunal considered the nature of the dispute and the past allowance of such losses by the department. The Tribunal concluded that it was not a fit case for the imposition of the penalty and set it aside. The Tribunal directed the appellant to compute the amount after considering the permissible limit of 0.1% and pay the differential amount along with interest.In conclusion, the Tribunal disposed of the appeal by upholding the demand for the short receipt of base oil within the normal limitation period, confirming interest, setting aside the penalty, and directing the appellant to pay the differential amount after considering the permissible limit.