Appeal dismissed on duty credit denial due to minor stock shortage in raw material

The Revenue's appeal against the order setting aside a demand of 5,62,417/- and penalties for denying credit on short-received raw material was dismissed. The respondents, engaged in manufacturing lead and copper sulphate solution, claimed duty credit for raw material received from mines despite a minor shortage in stock. The Tribunal upheld the order, considering losses below 0.05% negligible and accepting the explanation of moisture evaporation during transportation as justification for the shortage. The respondents were found eligible for credit, with no evidence of duty evasion.

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Issues involved: Appeal against demand and penalties u/s 5,62,417/- for denial of credit on short received raw material.

Summary:
The Revenue appealed against an order setting aside a demand of &8377; 5,62,417/- and penalties due to denial of credit for short received raw material. The respondents, engaged in manufacturing lead and copper sulphate solution, received zinc lead of copper concentrate from mines located 80-100 Km away. They cleared the concentrates on duty payment from the mines and claimed duty credit upon receipt in the factory. A stocktaking revealed a minor shortage (<0.05%) in the factory, which the Revenue argued rendered the respondents ineligible for credit as the inputs were not used in final product manufacture. The respondents contended that minor losses during transportation due to moisture evaporation from wet concentrates justified the shortage, citing a Tribunal decision in Hindustan Zinc Ltd. Vs. CCE. With losses below 0.05% deemed negligible and no evidence of duty evasion, the impugned order was upheld, dismissing the appeal.

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