2005 (1) TMI 294 - AT - Central Excise

Appellate Tribunal grants Modvat credit on transit losses of liquid oxygen, overturns penalty, rejects decantation losses appeal.

The Appellate Tribunal allowed the appeal by permitting Modvat credit on transit losses of liquid oxygen gas and setting aside the penalty imposed on the ... Cenvat/Modvat - Shortage of inputs - Penalty Issues:1. Modvat credit on transit losses of liquid oxygen gas2. Imposition of penalty on the Appellant3. Decantation losses on liquid oxygen gasAnalysis:Issue 1: Modvat credit on transit losses of liquid oxygen gasThe Appellant contended that Modvat credit should be allowed on the transit losses of liquid oxygen gas. The representative cited previous Tribunal decisions, including Neera Enterprises v. Collector of Central Excise and Hindustan Lever Ltd. v. Commissioner of Central Excise, to support their argument. They emphasized that the issue of transit losses had been settled in various cases. The Appellant had already paid the duty before the show cause notice was issued, which, according to them, made the penalty inapplicable. The Appellant's argument was supported by decisions such as Arun Prestressed Concrete Products P. Ltd. v. CCE, Bangalore and Arvind Chemi Synthetic (P) Ltd. v. Commissioner of Central Excise, Delhi-III. Consequently, the Appellant requested that the appeal be allowed based on these grounds.Issue 2: Imposition of penalty on the AppellantThe Respondent, on the other hand, opposed the Appellant's claim, stating that the quantum of losses in the present case was high, which, in their view, disqualified the Appellant from receiving any relief. However, the Appellant argued that the penalty should not be imposed since they had voluntarily paid the duty amount before the issuance of the show cause notice. The Appellant had paid an amount of Rs. 49556.20, which exceeded the calculated amount of 28132.28. Consequently, the Appellant contended that the penalty was not warranted in this situation.Issue 3: Decantation losses on liquid oxygen gasThe subject matter of the appeal involved decantation losses on liquid oxygen gas, a highly volatile material prone to evaporate even from well-insulated tankers. The Tribunal noted that there was no indication that the losses were abnormal in quantity. Referring to previous cases such as Commissioner of Central Excise, Rajkot v. Bombay Dyeing & Mfg. Co. Ltd., the Tribunal emphasized that Modvat credit should not be denied based on differences in weight caused by factors like adsorption or evaporation of moisture. The Tribunal also cited cases like Bhoruka Textiles Limited v. Commissioner of Central Excise, Bangalore and Hindustan Lever Limited v. Commissioner of Central Excise, Mumbai to support this stance. Consequently, the Tribunal rejected the appeal concerning decantation losses on liquid oxygen gas.In conclusion, the Appellate Tribunal allowed the appeal by permitting Modvat credit on transit losses of liquid oxygen gas and setting aside the penalty imposed on the Appellant. However, the appeal regarding decantation losses on liquid oxygen gas was rejected.