Tribunal allows appeal for CENVAT Credit on shortage of raw materials

The tribunal allowed the appeal, setting aside the initial order that denied the appellant the recovery of inadmissible CENVAT Credit on the shortage of raw materials. The tribunal found the 0.0041% shortage of aluminium scrap to be negligible, attributing it to the weighing process conducted outside the premises. It held that the shortage was not substantial enough to justify denying the CENVAT Credit for duty paid on the imported inputs, citing previous decisions that required substantial evidence to support such denials.

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Issues: Recovery of inadmissible CENVAT Credit on shortage of raw materials

The judgment revolves around the recovery of inadmissible CENVAT Credit amounting to Rs. 3,82,510 on the shortage of raw materials, specifically aluminium scrap imported through various Bills of Entry between June 2006 and March 2008. The Revenue contended that the shortage was detected during a factory visit. The appellant argued that they never imported aluminium scrap during the said period, instead procuring it domestically. They received 14 consignments of aluminium scrap during the period in question, with a shortage of 0.0041% attributed to the weighing process conducted outside due to the absence of a weighing bridge on their premises. The appellant cited possible calibration discrepancies in the weighing process and referenced tribunal decisions supporting their case.

The tribunal considered whether the appellant could avail CENVAT Credit for the allegedly short-received aluminium scrap. It was noted that the scrap was received in containers at the factory premises without any diversion en route. The tribunal found the 0.0041% shortage to be negligible and not substantial enough to justify denying CENVAT Credit for duty paid on the imported inputs. The tribunal relied on a previous decision by the Larger Bench, which established that CENVAT Credit cannot be denied solely based on specific allegations without substantial evidence. Consequently, the tribunal held the impugned order to be unsustainable and allowed the appeal, setting aside the initial order.

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