Tribunal rules in favor of Small Scale Industry unit in CENVAT credit reversal case

The Tribunal ruled in favor of the Appellant, a Small Scale Industry unit, in a case involving the reversal of CENVAT credit of duty taken in relation to the closing stock as of 31.3.2010. The Tribunal accepted the Appellant's contentions regarding the actual quantity of CENVAT contained stock and the duty payable, contrary to the Department's demand. The Tribunal dismissed the allegation of suppression, acknowledged the contradiction in the show cause notice findings, and directed the Appellant to deposit the calculated amount of CENVAT credit with interest within eight weeks, without imposing a penalty due to the nature of the mistake and the Appellant's closure.

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Issues:
1. Failure to reverse CENVAT credit of duty taken in respect of closing stock as on 31.3.2010.
2. Erroneous quantification of demand for duty.
3. Allegation of suppression.
4. Contradictory findings in show cause notice.

Analysis:
1. The Appellant, a Small Scale Industry (SSI) unit, faced proceedings for not reversing the CENVAT credit of duty taken in relation to the closing stock as of 31.3.2010. The Department issued a show cause notice (SCN) for the recovery of CENVAT credit on the assumption that 80% of the pig iron in the closing stock was of CENVAT availed quantity. However, the Appellant contended that the actual CENVAT contained stock was only 18,087 kilograms, not the 50,778 kilograms assumed by the Department.

2. The learned counsel for the Appellant presented a worksheet showing that the duty payable on the actual CENVAT inputs in the closing stock was only &8377; 40,166, contrary to the Department's demand of &8377; 1,12,732. The counsel demonstrated that the Appellant had followed the FIFO method to calculate the CENVAT inputs used in the final products and in stock. Despite the Department's request for remand for verification, the Tribunal found the figures provided by the counsel to be correct, considering the Appellant's closure and the impracticality of further verification.

3. The Tribunal acknowledged that the closing stock was reflected in the ER-3 return for the quarter ending March 2010, dismissing the allegation of suppression. The Tribunal also noted the contradiction between the findings in the SCN and the evidence presented by the Appellant, emphasizing the correctness of the worksheet submitted by the Appellant's counsel.

4. Ultimately, the Tribunal directed the Appellant to deposit the calculated amount of CENVAT credit with interest within eight weeks and report compliance. The Tribunal expressed a preliminary view that no penalty should be imposed, recognizing that such mistakes could occur, especially for SSI units. The Tribunal aimed to resolve the matter promptly to avoid unnecessary prolongation and inconvenience to both the Appellant and the Department.

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