Cenvat credit on transit shortages: divergent precedent led to denial of full pre-deposit waiver and recovery stay.

Divergent precedent on Cenvat credit for inputs short-received in transit led the CESTAT, Chennai to treat the issue as arguable, but not strong enough for complete relief. Where some rulings allowed credit for transit losses attributable to natural causes and a Larger Bench restricted credit to the quantity actually received, the appellants were found to lack a sufficient prima facie case for full waiver. Full waiver of pre-deposit and stay of recovery were therefore declined, and partial deposit was directed.

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Issues: Whether full waiver of pre-deposit and stay of recovery should be granted in respect of the disputed duty and penalty arising from denial of Cenvat credit on inputs short-received in transit.

Analysis: The available precedents on credit for quantities lost in transit were found to be divergent. Some decisions supported credit where the shortage was attributed to natural causes, while other decisions, including a Larger Bench ruling, limited credit to the quantity actually received in the factory. On that basis, the matter was treated as arguable, but the appellants were held not to have established a sufficiently strong prima facie case for complete waiver of the pre-deposit.

Conclusion: Full waiver of pre-deposit and stay of recovery were declined, and the appellants were directed to deposit a portion of the disputed amount.

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