Minor stock discrepancies cannot justify denial of Cenvat credit absent diversion or clandestine removal.

Minor stock shortages in input records were held insufficient to deny Cenvat credit where there was no allegation or evidence of diversion or clandestine removal and the overall variation was negligible. The record showed both excess and shortage in different inputs, with total variation of only 0.22% to 0.23% of inputs received. In that factual context, the requirement to maintain records did not justify disallowance of credit, and the credit denial was unsustainable.

---

---

Issues: Whether Cenvat credit on inputs could be denied on the basis of minor stock shortages when there was no allegation of diversion of inputs and the overall variation was negligible.

Analysis: The appellant was found to have both excess and shortage in different inputs, with the overall variation being only 0.22% to 0.23% of the total inputs received. The record did not disclose any allegation or evidence of diversion of inputs or clandestine removal. In the light of the earlier decision sustaining credit where shortages were insignificant and were accompanied by excess stock, the mere existence of minor stock discrepancies was held insufficient to dislodge the credit. The requirement to maintain records did not justify denial of credit when the discrepancy was marginal and within permissible tolerance in the factual context.

Conclusion: Cenvat credit could not be denied, and the disallowance was unsustainable.

---