CENVAT credit on minor weighbridge differences and re-inducted inputs requires proof; penalty was remanded for fresh consideration.

Minor weighbridge variations of about 1 to 2 per cent were treated as normal differences and not as true shortages, so credit on duty-paid inputs was admissible subject to verification of actual figures. Where alleged shortages were said to arise from transcription error or later excess supply, credit was not automatically allowed and had to be proved by GRNs, weighment slips, invoices and ledger entries before the original authority. Credit on rejected inputs later re-accepted into use through Re-GRN was available only on proper documentary proof, and the disputed claims were remanded for fresh examination. Penalty equal to the credit demand was set aside for reconsideration on remand.

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Issues: (i) whether short receipt of inputs arising from insignificant weighbridge differences could be treated as inadmissible short receipt for denying credit; (ii) whether shortages attributable to transcription error and later reconciled or made good by excess supply could justify denial of credit; (iii) whether credit was admissible on inputs initially rejected but later re-accepted into use through Re-GRN and supporting records; and (iv) whether penalty equal to the credit demand was sustainable.

Issue (i): whether short receipt of inputs arising from insignificant weighbridge differences could be treated as inadmissible short receipt for denying credit

Analysis: Variations of about 1 to 2 per cent in weighment were treated as normal differences arising from different weighbridges and not as true shortages, especially where the supplier was not debited for the proportionate price. Such marginal variations, supported by the settled approach that minor weighment differences do not by themselves negate receipt or use of duty-paid inputs, were held not to justify denial of credit.

Conclusion: Credit was admissible on this category, subject to verification of the actual figures.

Issue (ii): whether shortages attributable to transcription error and later reconciled or made good by excess supply could justify denial of credit

Analysis: The claim of transcription error was not accepted as a blanket explanation. Where shortages were merely adjusted in accounts without reliable supporting evidence, or where excess supply had been made without cover of proper excise documents after settlement of the shortage, credit could not be allowed. At the same time, the matter was left open for individual verification where the assessee could produce GRNs, weighment slips, commercial invoices and ledger entries to show bona fide reconciliation and absence of proportionate recovery from the supplier.

Conclusion: Credit was not automatically allowable, but the assessee was entitled to establish eligible claims on a case-by-case basis before the original authority.

Issue (iii): whether credit was admissible on inputs initially rejected but later re-accepted into use through Re-GRN and supporting records

Analysis: Where rejected inputs were later brought back into the manufacturing stream, credit could be allowed if the assessee proved reversal of the original debit by Re-GRN, commercial invoices, credit notes and corresponding ledger adjustments. Since such evidence had been accepted in some cases but was not available for all disputed consignments, a further opportunity for proof was considered necessary.

Conclusion: Credit was admissible only on proper proof, and the disputed claims were remanded for fresh examination.

Issue (iv): whether penalty equal to the credit demand was sustainable

Analysis: Availment of credit on inputs not shown to have been used in manufacture justified demand of credit and interest. However, because the record indicated excess supplies to make good shortages and the department had not established removal of the disputed inputs from the factory without duty payment, penalty equal to the amount determined was not upheld in its present form and had to be reconsidered afresh on remand.

Conclusion: The penalty was set aside for fresh decision.

Final Conclusion: The matter was remanded for de novo consideration on the disputed categories of credit, with relief granted on the weighbridge-difference issue and fresh verification directed for transcription-error and re-induction claims, while the penalty was left to be reconsidered accordingly.

Ratio Decidendi: Minor weighbridge variations do not by themselves disqualify credit on duty-paid inputs, but credit on disputed shortages is allowable only on reliable proof of receipt, reconciliation, or lawful re-induction, and penalty must be reconsidered where the factual basis for clandestine misuse is not established.

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