2015 (7) TMI 1171 - AT - Central Excise

Tribunal rules in favor of appellant: Cenvat credit not reversed for lost finished goods

M/s. Shakumbari Sugar & Allied Industries Ltd. Versus C.C.E. & S.T. Meerut

M/s. Shakumbari Sugar & Allied Industries Ltd. Versus C.C.E. & S.T. Meerut - TMI Issues:1. Whether the appellant is required to reverse the cenvat credit on the quantity of finished goods short received in the factory from the job worker's premises, attributable to the process loss at the factory of the job worker.Analysis:The case involved the appellant, engaged in the manufacture of Sugar and Molasses, who imported raw sugar but lost a portion during transit and processing at the job worker's premises. The appellant reversed the cenvat credit of Additional Duty of Customs paid on the lost quantity. The dispute arose regarding whether the appellant should reverse the cenvat credit for the processed sugar not received back in the factory. The appellant filed a refund application, which was rejected by the Department, leading to the present appeal before the Tribunal.The appellant's advocate argued that since cenvat credit was taken based on the raw sugar received in the factory, it should not be denied due to process loss at the job worker's premises. He highlighted that process loss is common in the trade and cited precedents to support the appellant's position. On the other hand, the Department's representative contended that the appellant had not provided records of the actual loss during processing and that any compensation received for losses should negate the cenvat benefit. The Department also raised concerns about compliance with Central Excise Rules during the return of processed sugar to the factory.After considering the arguments, the Tribunal found that the appellant had followed the required procedures for availing cenvat credit on the raw sugar received. The Tribunal noted that the cenvat statute did not mandate the reversal of credit in cases of process loss. Referring to Rule 4(5)(a) of the Cenvat Credit Rules, the Tribunal emphasized that the statute did not specify reversing credit for process loss. The Tribunal also cited a previous case to support its stance that credit cannot be denied for goods lost during processing at the job worker's premises.The Tribunal observed that the appellant had provided evidence of the process loss through a certificate from the job worker's Superintendent. The Tribunal concluded that the denial of the refund claim by the lower authorities was not legally justified. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, granting the consequential benefit of refund.In summary, the Tribunal ruled in favor of the appellant, emphasizing that the cenvat credit should not be reversed for the quantity of finished goods lost during processing at the job worker's premises, as there was no specific provision in the cenvat statute requiring such reversal. The Tribunal found that the appellant had complied with the necessary procedures and was entitled to the refund claimed.