Tribunal allows appeal on Modvat credit denial for minor discrepancies in input quantities.

The Tribunal allowed the appeal against the denial of Modvat credit for the period September 1996 to August 1999. The appellant's argument that slight discrepancies in quantity of inputs received should not result in denial of credit was accepted. The Tribunal noted that the revenue had previously condoned a 2% shortage in a related case, making the denial of credit in the present case, where the shortage was less than 2%, unsustainable. As a result, the denial of credit was set aside, and the appeal was allowed.

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Issues:
Appeal against denial of Modvat credit for the period September 1996 to August 1999 due to alleged shortage of inputs compared to invoices.

Analysis:
The appellant contended that the inputs, residual fuel oil, and furnace oil, were received from Indian Oil Corporation in tankers, leading to differences in quantity due to varying weighment methods. The appellant argued that the shortage was minimal, ranging from 0.5% to 0.1%, and sometimes they even received excess goods without objection from the revenue. Additionally, the Assistant Commissioner had acknowledged a loss of up to 3% for petroleum products in a subsequent period without challenge from the revenue. The appellant emphasized that duty had been paid on the quantity mentioned in the invoices, and the slight discrepancies should not result in denial of credit.

The revenue's position was that credit should only be granted for inputs actually received in the factory, and since the appellants received less than what was stated in the invoices, the denial of credit was justified. However, the facts revealed that the inputs, received in liquid form and filled in tankers at the Indian Oil Corporation factory, underwent weighment by dip stick method, while weighment at the appellant's factory was done by weight. Notably, the adjudicating authority had previously condoned a 2% shortage in petroleum products received by the appellants in a subsequent period, citing a precedent set by the Tribunal in a related case.

Given that the revenue did not challenge the condonation of a 2% shortage in the subsequent period, the Tribunal found the demand in the present case, where the shortage was less than 2%, to be unsustainable. Consequently, the appeal was allowed, and the denial of credit was set aside.

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