2024 (12) TMI 77 - AT - Central Excise

CESTAT allows appeals against CENVAT credit denial and penalty for raw material stock shortage following previous identical decisions

CESTAT Ahmedabad allowed appeals challenging denial of CENVAT credit and penalty levy due to physical shortage of raw materials compared to recorded ... Denial of CENVAT credit - levy of penalties - huge physical shortage of raw materials, than the recorded stock - HELD THAT:- It is found that the impugned order was passed on the same issue in the matter of four show cause notices. In the matter of two show cause notices bearing Nos. DGCEI/AZU/36-105/2014-15 dated 15.07.2015 and DGCEI/AZU/36-106/2014-15 dated 15.07.2015, this Tribunal in ANUPAM INDUSTRIES LIMITED, DHARAMPAUL ASSOCIATES, KESHAV STEEL AND MEHUL PATEL VERSUS COMMISSIONER OF C.E. & CUSTOMS-ANAND [2024 (6) TMI 842 - CESTAT AHMEDABAD] allowed the appeals by setting aside the impugned order. Since the present appeals are out of the same impugned order involving same issue and identical facts, the issue in the present case is no longer res-integra. In view of above order, it can be seen that issues in the present appeal as well as in the appeals disposed of by the above order are identical in all respect, therefore, following the ratio of the above decision, in the present case also, the demand is not sustainable. Appeal allowed. Issues:Appeal against denial of Cenvat credit and imposition of penalties based on shortage of raw materials and alleged theft.Analysis:The case involved an appeal against the denial of Cenvat credit and imposition of penalties on the appellants due to a shortage of raw materials and alleged theft. The officers of the DGCEI gathered intelligence that raw materials were being stolen from the premises of the assessee. Upon investigation, it was found that there was a significant physical shortage of raw materials compared to the recorded stock. The appellants were issued show cause notices for recovery of Cenvat credit, interest, and penalties. The impugned order confirmed the Cenvat credit demand and imposed penalties. The appellants appealed against this order.The Tribunal noted that two previous appeals with similar issues had been allowed, setting aside the impugned order. The present appeals were based on the same issue and facts as the previous appeals. The Tribunal referred to the previous order, highlighting that the investigation by the Revenue was deficient and incomplete. It was observed that there was no concrete evidence to prove that the shortage of raw materials was due to theft or diversion. The Tribunal emphasized that the charge of shortage of inputs must be proven by positive evidence and not mere assumptions.Regarding the Cenvat credit rules, the Tribunal found that there was no allegation of incorrect or improper credit taken initially. The demand was based on shortages that were not reconciled. The appellants had explained the reasons for the shortages, which were reconciled during the implementation of the SAP system. The Tribunal emphasized that without evidence of clandestine removal or diversion of inputs, improper accounting alone could not justify a Cenvat credit demand.The Tribunal also addressed the allegation of the appellant receiving Cenvatable invoices without physical receipt of materials. However, the statements made by the involved parties were not supported by documentary evidence, and the appellant's request for cross-examination of witnesses was denied. The Tribunal cited legal precedents emphasizing the importance of cross-examination and declared that the statements without proper cross-examination were not admissible evidence.Based on the previous order and the lack of concrete evidence in the present case, the Tribunal set aside the impugned order and allowed the appeals with consequential relief. The demand for Cenvat credit was deemed unsustainable, and the penalties imposed were overturned.