2016 (11) TMI 400 - AT - Central Excise

Tribunal rules in favor of appellant, overturning service tax demand and penalty

Tata Motors Ltd Versus Commissioner of Central Excise, Pune

The tribunal ruled in favor of the appellant, setting aside the demand for service tax and penalty imposed. The discrepancy in input inventory, at 0.08%, ... Discrepancy in the inventory of input on which Cenvat credit being taken - Held that:- It cannot be ruled out that in a big industry, there is always possibility of minor variations in the stock, which occurred due to human error. Moreover, in the present case neither there is any charge nor any evidence to show that differences in input inventory is either due to short receipt or cleared from factory clandestinely. In such a situation, even if there is shortage of input, the same must be lying in the factory. On the identical issue in the appellant’s own case cited by the Ld. Counsel, this Tribunal has decided the issue relying on the decision of Maruti Udyog Ltd [2004 (6) TMI 155 - CESTAT, NEW DELHI ] which was upheld by the Hon’ble Apex Court reported as [2015 (8) TMI 493 - SUPREME COURT ] that Cenvat credit cannot be disallowed in the facts and circumstances of the present case. - Decided in favour of assessee Issues:1. Discrepancy in inventory of input leading to demand of service tax.2. Denial of Cenvat credit due to discrepancy in input inventory.Analysis:1. The case involved a discrepancy in the inventory of input during a specific period, resulting in a demand for service tax amounting to Rs. 32,28,644. The appellant was alleged to have not consumed inputs in relation to the manufacture of the final product, leading to the imposition of a penalty. The Commissioner(Appeals) upheld the decision of the adjudicating authority, prompting the appellant to file an appeal before the tribunal.2. The appellant argued that the discrepancy in input inventory was due to human error in issuing inputs to the production plant or making entries in the computer records, rather than any intentional wrongdoing. The discrepancy was minor, at 0.08% of the total movement of inputs, and there was no evidence of inputs being received inadequately or removed clandestinely. The appellant cited a similar case, M/s. Tata Motors Ltd. Vs. Commissioner of Central Excise, Pune-I, to support their argument that such minor discrepancies should not lead to the denial of Cenvat credit.3. The Revenue, represented by the Asstt. Commissioner, reiterated the findings of the lower authorities regarding the discrepancy in input inventory and the denial of Cenvat credit.4. The tribunal carefully considered both sides' submissions and found that the discrepancy in input inventory, amounting to 0.08%, was likely due to human error, which is common in large industries. Importantly, there was no evidence of intentional wrongdoing such as short receipts or clandestine removal of inputs.5. The tribunal relied on a previous decision involving Maruti Udyog Ltd., upheld by the Supreme Court, which emphasized that minor discrepancies in input inventory should not automatically lead to the denial of Cenvat credit. The tribunal, following the Supreme Court's decision, set aside the impugned order and allowed the appeal, stating that in the present case, the Cenvat credit should not be disallowed based on the established legal principles.In conclusion, the tribunal ruled in favor of the appellant, setting aside the demand for service tax and the penalty imposed, based on the principles established in previous judgments and the lack of evidence supporting intentional wrongdoing in the discrepancy of input inventory.