Cenvat credit on inputs lost during storage upheld by High Court

Cenvat credit on inputs lost during storage upheld by High Court as the Revenue in a similar case was not successful before the Supreme Court  

ABCAUS Case Law Citation:
ABCAUS 2239 (2018) (03) HC

The Excise Department had preferred the instant appeal before the High Court under Section 35-G of the Central Excise Act, 1944 (‘Act’) against the order passed by the CESTAT.

The questions of law sought to be answered were as under: 

(1) Whether Cenvat credit on inputs lost during storage can be allowed? 
(2) Whether Cenvat credit on inputs which have not been used in or in relation to manufacture of excisable goods can be allowed, on the grounds that they were lost during storage, due to natural causes?

The Tribunal had relied on its earlier decision in a case relating to the assessee itself wherein it took a view that losses had occurred in storage of molasses due to natural phenomena which was within the prescribed limit of 2 per cent as laid down by the Board Circular.

In the said case the Tribunal had observed that the Revenue was not successful in appeal against the decision of the Tribunal before the Supreme Court and there was no reason to take a different view for the purpose of Cenvat credit,  where the input is molasses and the quantity is reduced due to storage.

The Hon’ble High Court observed that in the instant case, following the decision given in the case of assessee itself, the Tribunal allowed Cenvat credit in respect of molasses lost during storage when admittedly the duty stands paid by the manufacturer on the full quantum of the molasses.

In view of above, the Hon’ble High Court answered the questions of law in favour of the assessee and against the department.