Kay Bee Alum Pvt. Ltd. Vs. Cce - Court Judgment

Excerpt:
1. the appellant is a manufacturer of alum (alumina ferric) which is liable to central excise duty. the main input is sulphuric acid and the appellant had been taking modvat credit in respect of duty paid sulphuric acid purchased. under the impugned order, modvat credit of about rs. 1.5 lakhs has been denied in respect off purchases of sulphuric acid during the period april 1996 to february 1997. there is also a duty demand of about rs. 5466 - on the ground that the appellant had removed manufactured goods without payment of duty.2. the basic evidence of the revenue is that the private record of the appellant (seized during a visit on 18.2.99) showed the entry "acid papers adjustment up to date 445.49 mt". this is a "monthly abstract".based on entry in the private record, notice was issued holding that the quantity of sulphuric acid "adjusted" would not be eligible for modvat credit.3. the appellant resisted the allegation, explaining that "adjustment" related to cases of sulphuric acid consignment, received from various suppliers, where purity (concentration) was low. it was pointed out that wherever a consignment was found to be of lower concentration this position was reported to the supplier and supplied gave rebate in price. this position was explained by mr. agarwal, executive director on the date of visit itself. the appellant had also placed its registers as well as credit notes from the suppliers in support of the explanation. all the same, the appellant failed in adjudication as well as in the first appeal. thus, the matter has traveled to this tribunal.4. i have perused the record and heard learned dr also. during the hearing, learned counsel for the appellant has shown that the appellant was page 0161 receiving credit notes in regard to lower concentration supplies. the credit note dated 21.12.96 of m/s hindustan zinc limited, a govt. of india enterprises, states that "being the quality discount allowed @ rs. 250/- pmt on upliftment of 43.600 m.t. low grade sulphuric acid during the month of october, 96". the credit so given is rs. 10,900/-. to the same effect is the notes of other suppliers like m/s udaipur phosphates & fertilisers ltd. 5. from a perusal of the case records, it is clear that the adjustment in question relates to only the adjustment required on account of lower quality of sulphuric acid. it is not indicative of any sinister effort to evade central excise duty either by removing inputs or finished products without payment of dirty. the appellant's explanation merits acceptance, particularly, in view of the fact that its suppliers are other manufacturers, including the central govt. public sector company.in these circumstances, the denial of modvat credit has to be held as not warranted the facts of the case. with regard to the demand for rs. 5466/-, it is being explained that this relates to sale of ash. the appellants has also produced a cash receipt for the same. it is well settled that ash is not manufactured goods attracting duty. so this demand also is not sustainable.6. in the result, appeal is allowed, after setting aside the impugned order, with consequential relief, if any, to the appellant.

Judgment:
1. The appellant is a manufacturer of Alum (Alumina Ferric) which is liable to Central Excise duty. The main input is Sulphuric acid and the appellant had been taking Modvat credit in respect of duty paid Sulphuric acid purchased. Under the impugned order, Modvat credit of about Rs. 1.5 lakhs has been denied in respect off purchases of Sulphuric acid during the period April 1996 to February 1997. There is also a duty demand of about Rs. 5466 - on the ground that the appellant had removed manufactured goods without payment of duty.

2. The basic evidence of the Revenue is that the private record of the appellant (seized during a visit on 18.2.99) showed the entry "Acid papers adjustment up to date 445.49 MT". This is a "Monthly Abstract".

Based on entry in the private record, notice was issued holding that the quantity of Sulphuric acid "adjusted" would not be eligible for Modvat credit.

3. The appellant resisted the allegation, explaining that "adjustment" related to cases of Sulphuric acid consignment, received from various suppliers, where purity (concentration) was low. It was pointed out that wherever a consignment was found to be of lower concentration this position was reported to the supplier and supplied gave rebate in price. This position was explained by Mr. Agarwal, Executive Director on the date of visit itself. The appellant had also placed its registers as well as credit notes from the suppliers in support of the explanation. All the same, the appellant failed in adjudication as well as in the first appeal. Thus, the matter has traveled to this Tribunal.

4. I have perused the record and heard learned DR also. During the hearing, learned Counsel for the appellant has shown that the appellant was Page 0161 receiving credit notes in regard to lower concentration supplies. The credit note dated 21.12.96 of M/s Hindustan Zinc Limited, A Govt. of India Enterprises, states that "Being the quality discount allowed @ Rs. 250/- PMT on upliftment of 43.600 M.T. low Grade Sulphuric Acid during the month of October, 96". The credit so given is Rs. 10,900/-. To the same effect is the notes of other suppliers like M/s Udaipur Phosphates & Fertilisers Ltd. 5. From a perusal of the case records, it is clear that the adjustment in question relates to only the adjustment required on account of lower quality of Sulphuric acid. It is not indicative of any sinister effort to evade Central Excise duty either by removing inputs or finished products without payment of dirty. The appellant's explanation merits acceptance, particularly, in view of the fact that its suppliers are other manufacturers, including the Central Govt. Public Sector company.

In these circumstances, the denial of Modvat credit has to be held as not warranted the facts of the case. With regard to the demand for Rs. 5466/-, it is being explained that this relates to sale of ash. The appellants has also produced a cash receipt for the same. It is well settled that ash is not manufactured goods attracting duty. So this demand also is not sustainable.

6. In the result, appeal is allowed, after setting aside the impugned order, with consequential relief, if any, to the appellant.