2008 (10) TMI 452 - AT - Central Excise

Tribunal overturns Commissioner's order, favors appellant in Modvat credit dispute.

The Tribunal allowed the appeal in favor of the appellant, setting aside the Commissioner's order and upholding the original authority's decision. The ... Demand - Shortage of raw materials Issues:Alleged shortage of steel wire rods leading to incorrect Cenvat credit reversal.Analysis:The case involved a show-cause notice alleging a shortage of steel wire rods in the appellant's factory, leading to the reversal of Cenvat credit. The department claimed that the shortage arose due to incorrect reading or loss of weight during transit, demanding the reversal of Cenvat credit and imposing a penalty. The original authority dropped the proceedings as the shortage was less than 1% and the duty paid on raw material was recovered from the appellant. However, the jurisdictional Commissioner reviewed the case and remanded it to rework the liability based on item-wise or invoice-wise pricing. The appellant argued that there was no stock verification, and the appellate authority erred in treating the shortage as 'deemed shortage'. The appellant contended that the negligible shortage over a long period should be neglected, citing relevant case laws.The Tribunal noted that the appellant had availed Cenvat credit on the entire duty paid for the inputs received, with all input quantities duly recorded. The department's case relied on records as no physical stock verification was conducted, making it challenging to determine any short-received quantity accurately. The show-cause notice admitted the shortage due to incorrect reading or weight loss during transit. The Tribunal observed inconsistencies in the department's case and concluded that the benefit of doubt should favor the assessee. Citing precedents, the Tribunal held that negligible shortages should not lead to the denial of Modvat credit.In the final decision, the Tribunal deemed the remand ordered by the Commissioner as futile, setting aside the Commissioner's order and upholding the original authority's decision. The appeal was allowed in favor of the appellant.This detailed analysis of the judgment highlights the issues, arguments presented, relevant legal principles, and the Tribunal's final decision, providing a comprehensive overview of the case.