The Mumbai bench of CESTAT set aside the order passed against the appeal and allowed the appeal filed by the petitioner.
The issue in this appeal by the assessee is the stand of the central excise authorities that, notwithstanding the duty liability having been discharged to full extend on procurement of inputs, viz., ‘base oil’ and ‘other petroleum oils’ which are volatile in nature.
The impugned order of Revenue had upheld the finding of the original authority confirming recovery of ₹ 40,22,712/- for the period from October 2010 to September 2011.The lower authorities had adopted the benchmark of 2% as the ‘tolerance’ and further denied credit wherever the difference was more than 0.4% as established by issue of debit notes.
The appellant argued that any compensatory restitution received through settlement of an insurance claim is adjusted by paying duty to that extent, which has not been contested by the Revenue. This is the only situation envisioned by the decisions relied upon for imposing liability in recovery proceedings.
Revenue contended that the availment of credit to the extent of ‘loss in transit’, submitted by the appellant as ascertained from measurement at the factory, is incorrect in terms of rule 3 of CENVAT Credit Rules, 2004. Revenue also contended appellant has made claim tax credit on manufacture of non-excisable goods. Revenue argued that, in terms of rule 2(k) of CENVAT Credit Rules, 2004, only such ‘duty paid’ goods as have been used in the manufacture of excisable goods are entitled to be availed as credit.
The bench comprising Ajay Sharma (Member, Judicial) and C J Mathew (Member, Technical) observed that loss in transit is not includible for computation of ‘assessable value’. The court set aside the impugned order. The Appellant was represented by Payal Nahar. Respondent was represented by Xavier R Mascarenhas.
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