2013 (8) TMI 128 - AT - Central Excise

Tribunal overturns recovery order for Cenvat Credit on Aluminium products due to input shortages

The Tribunal set aside the order demanding recovery of Cenvat Credit from a manufacturer of Aluminium products due to shortages in certain inputs. The ... Eligibility to take Cenvat Credit in respect of shortage quantity of input items - Shortages of inputs on inspection are not real shortages - Appellant use a large number of inputs about 60 to 80, for manufacture for their final products - Shortages in respect of 6 items mentioned above which had been detected in course of annual stock taking conducted by the appellant themselves - In respect of some other items, there was excess quantity also – Held that:- Shortage according to the appellant, in terms of percentage is about 2% and this fact is not refuted by the Department - In respect of solid inputs weightment is done by the weighing scale and in respect of furnace oil, the weightment is done by the dip-reading - Mistake are possible in determining the weight of inputs by weighing scale or by dip-reading. The fact that the mistakes are random mistakes, is also evident from the fact that in respect of a number of other items, there is excess also - Alleged shortages of inputs are not real shortages relying upon the decisions in the case of Triveni Glass Ltd. Vs. Commissioner of Central Excise, Allahabad reported in [2007 (8) TMI 194 - CESTAT, NEW DELHI] and other similar cases – Decided in favor of Assessee. Issues:Manufacture of Aluminium products chargeable for Central Excise duty, Cenvat Credit availed on inputs, Shortages found during stock taking, Show Cause Notice for recovery of Cenvat Credit, Appeal against order-in-original, Alleged shortage of inputs, Tribunal's decision on similar cases, Departmental defense of the order, Eligibility for Cenvat Credit, Dispute over shortages, Mistakes in weightment, Excess quantity found, Tribunal's decision in appellant's own case.Analysis:The appellant, a manufacturer of Aluminium products chargeable for Central Excise duty, availed Cenvat Credit on inputs and capital goods as per the Cenvat Credit Rules 2004. During stock taking in 2008, shortages were found in certain Cenvated inputs, leading to a demand for recovery of Cenvat Credit along with interest and penalty. The Assistant Commissioner confirmed the demand, rejecting the appellant's plea that the shortages were due to mistakes in weightment over time.On appeal, the appellant argued that the alleged shortages were not actual but due to mistakes in recording the weight of inputs issued for manufacture. They cited cases where a small percentage difference in weight was not sufficient to deny Cenvat Credit, especially when there was no allegation of clandestine removal of inputs. The Department defended the order, stating that the appellant failed to explain the shortages satisfactorily, justifying the denial of Cenvat Credit.The Tribunal considered the arguments and facts presented. It noted that the shortages were only in specific items detected during the appellant's stock taking, with excess quantity found in other items. The appellant's explanation that the shortages were due to mistakes in weightment was deemed plausible, especially considering the random nature of the mistakes. The Tribunal referenced previous decisions where similar issues were resolved in favor of the appellant, setting aside the Cenvat Credit demand.Ultimately, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal in favor of the appellant. The decision highlighted the importance of considering the context of shortages, the possibility of mistakes in weightment, and the lack of evidence supporting the denial of Cenvat Credit.