Krishna Kumar, Member (J) - (1.)THESE are the appeals against the order dated 17.2.2001 passed by the Commissioner (Appeals), Customs and Central Excise, Ghaziabad. The issue involved in both the appeals is whether modvat credit on transport/storage loss of molasses used in the manufacture of Ethyl Alcohol is allowable under the provisions of Rule 57 -A of the Central Excise Rules, 1944 (for short Rules). Since the issue involved is common, both the appeals are being disposed of by this common order. Shri A.N. Haksar, learned Sr. Advocate and Shri Kapil Vaishya, Chartered Accountant have appeared on behalf of the appellants. The learned Counsel submitted that the molasses used as a raw material for the manufacture of alcohol results in transport/storage loss mainly due to evaporation losses, sludge and also on account of natural loss as the molasses is highly hygroscopic in nature. U.P. Sheera Niyatratran Niyawavali 1974, Rule 8(4) vis -a -vis CBEC Circular No. 261/16/82 dated 6th February, 1982 and No. 261/136/97 -C & E dated 15th January, 1998 have permitted losses in storage of molasses up to 2%. Relying on the decision in the case of Bombay Dyeing and Manufacturing Co. Ltd. reported in (1998 (97) ELT 101 (Tribunal)) (para 4), the learned Counsel submitted that the Tribunal has held that as long as it is established that action or loss was real due to absorption or evaporation of moisture and increasing with the non -acceptance standard that action or loss in an industry, the modvat credit should not be denied to the same effect. He contended that the same principle has also been laid down in EKPN Spinning Mills Ltd. reported in (1996 (67) ECR 184 (Tribunal)) (para 5) and Rishi Iron & Steel Ltd. reported in (1996 (87) ELT 110 (Tribunal)) (para 7) and the decision in the case of Steel Authority of India Ltd. reported in, 1996 (88) ELT 314 (SC) :, 1997 (68) ECR 43 (SC) 1 (para 1). He further relied on the decision in the case of Raj Steel Chemical Works reported in (1991 (55) ELT 444 (SC) :, 1991 (36) ECR 465 (SC)). The learned Counsel also submitted that the same principle has been initiated in the case of SRF Ltd. reported in, 1999 (106) ELT 317 (Tribunal) (para 5) and the case of Adison Paints and Chemical Ltd. reported in : 1999 (110) ELT 951 (para 4). With regard to the penalty imposed, the learned Counsel submitted that no opportunity was given to the appellant and the learned Commissioner has not said anything with regard to the spill. Therefore, the question of imposition of penalty may also not arise because the learned lower authorities have relied on certain enquiries on the back of the appellants and the reports thereof were not supplied to the appellants and as such, no reliance can be placed thereon. Moreover, there is no provisions in the Central Excise Act or the Rules to demand duty of excise on goods discharged or lost within the factory due to factors beyond the appellants control or there being no clandestine removal of the input physically by appellants in contravention of any Rule. He therefore, submitted that the impugned order may be set aside and the appeals may be allowed.
(2.)SHRI B.C. Mahey, learned DR appeared on behalf of the Revenue and he reiterated the findings of the lower authorities and submitted that only manufacturer is entitled for the rebate of 2% as per the Board circular and not the buyers. I have carefully heard the rival submissions, perused the records and the case laws cited by the learned Counsel and I find that the ratio of the decisions mentioned above is squarely applicable in the present case and failure to grant modvat credit will defeat the very purpose of the Board circular. Therefore, the impugned order is set aside and the appeals are allowed.