Tribunal overturns denial of credit due to small input shortage, citing process losses and stock variations.

The tribunal allowed the appeal, ruling that denial of Cenvat credit based solely on a small quantity shortage of 6 MTs of input, representing 0.3% of total stock handled, was unwarranted. The tribunal considered inherent possibilities of evaporation and process losses, noting no evidence of clandestine disposal. Citing precedents, the tribunal emphasized allowing minor variations in stock quantities and overturned the lower authority's decision, granting the appellant relief.

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Issues:
Denial of Cenvat credit based on shortage of 6 MTs of intermediate input.

Analysis:
The appellant, engaged in manufacturing Chemical Additives for lubricant oil, faced a show cause notice proposing denial of Cenvat credit on 6MTs of input found short during an internal audit. The adjudicating authority upheld the demand, leading to an appeal before the Commissioner(Appeals) and subsequently to the tribunal.

The appellant's counsel argued that the shortage was due to handling, processes, and stock taking methods, not actual removal or short receipt of input. The counsel cited several judgments supporting the allowance of minor variations in stock quantities, emphasizing that the shortage was only 0.3% of the total stock handled during the financial year.

On the other hand, the Revenue representative reiterated the findings of the lower authority, stating that the admitted shortage of 6 MTs justified the denial of credit.

After considering both sides' submissions and reviewing the record, the tribunal found that the 6 MT shortage represented a minimal 0.3% of the total stock handled, with inherent possibilities of evaporation and process losses for the nature of the input. The tribunal noted that there was no evidence of clandestine disposal of the shortage and referenced the judgments cited by the appellant's counsel to support the allowance of minor variations in stock quantities without disallowing Cenvat credit.

Ultimately, the tribunal set aside the impugned order, allowing the appeal and ruling that denial of credit solely based on a small quantity found short in the internal audit report was unwarranted.

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