Tribunal overturns credit recovery order due to lack of evidence, emphasizing proof requirement for allegations.

The Tribunal allowed the appeal, setting aside the order for recovery of proportionate input credit due to alleged excessive losses during repacking. The Tribunal found no evidence of deliberate evasion or misuse of credit, emphasizing the lack of substantial proof linking the losses to unauthorized activities. Refuting Revenue's claims of diversion without concrete evidence, the Tribunal highlighted the necessity for credible proof to support allegations of breach of law. Citing precedent, the Tribunal underscored the indefeasible nature of CENVAT credit and the requirement for direct evidence to justify disallowance, ultimately ruling in favor of the appellant.

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Issues: Alleged recovery of proportionate input credit due to excessive loss of excisable goods during repacking.

Analysis:
1. The appellant, recognized as a manufacturer under section 2(f)(iii) of the Central Excise Act, 1944, repacked excisable goods purchased from its sister concern for different denomination packs. The goods were subject to Central excise duty under the MRP scheme.
2. Revenue alleged that the appellant's repacking process resulted in excessive loss of excisable goods, warranting recovery of proportionate input credit enjoyed on packing materials.
3. The appellant countered the allegations by explaining that the nature of the goods received for repacking was prone to moisture and handling losses, exacerbated by the old machines used. The appellant argued that the losses were within tolerable limits.
4. Revenue claimed that the losses observed from 2007-08 to 2011-12 were unjustifiable and calculated the proportionate inadmissible CENVAT credit based on the alleged losses.
5. The appellant denied any deliberate evasion, attributing the increasing trend of losses to various factors, and challenged Revenue's lack of evidence supporting the allegations of diversion or misuse of input credit.
6. Revenue contended that the increasing losses indicated a tendency to divert goods or input for unauthorized use, justifying the recovery of proportionate CENVAT credit and emphasizing the appellant's burden to prove eligibility for credit.
7. After hearing both sides and examining the records, the primary issue revolved around disallowing CENVAT credit based on the increasing trend of losses during repacking.
8. The Tribunal found no evidence of clandestine clearance of goods subjected to MRP, refuting Revenue's allegations of diversion without substantial proof.
9. While acknowledging the losses and their increasing trend, the Tribunal emphasized the lack of evidence linking the losses to deliberate evasion or misuse, highlighting Revenue's failure to provide substantial proof.
10. Citing the Apex Court judgment in Collector of Central Excise, Pune Vs. Dai Ichi Karkaria Ltd., the Tribunal emphasized the indefeasible nature of CENVAT credit and the absence of a direct correlation between raw material and final product for credit utilization.
11. The Tribunal reiterated the requirement for credible evidence to support accusations of breach of law, emphasizing the insufficiency of mere statistical figures without substantial proof.
12. Consequently, the Tribunal set aside the impugned order, allowing the appeal due to the lack of concrete evidence supporting the recovery of proportionate input credit based on alleged losses during repacking.

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