2004 (1) TMI 557 - AT - Central Excise

Summary

Issues: Denial of CENVAT credit on packing materials under Rule 57-AB of the Rules.

The appeal involved a dispute regarding the denial of CENVAT credit to the appellants on packing materials, specifically PP Woven Sacks/Bags under Rule 57-AB of the Rules. The appellants contended that due to space constraints in their factory premises, the packing material was stored in the premises of another company owned by the same entity. They argued that there was no intention of clandestine removal, as the quantity found short in their factory matched the quantity in the adjoining premises. On the contrary, the Department contended that since there was a removal of the packing materials on which CENVAT credit was claimed, the denial of credit was justified.

Upon examination of the facts, it was revealed that the appellants' factory was owned by a related company, and the shortage of packing material was due to storage in the premises of the related company because of space constraints. The Commissioner (Appeals) acknowledged this situation, indicating that there was no clandestine removal. The quantity discrepancy was explained by the storage arrangement, and the related company did not claim credit for the packing material. The Tribunal referred to a similar case where the charge of clandestine removal was disproved due to goods being moved to a godown for space reasons, aligning with the appellants' situation. Therefore, based on the circumstances and legal precedent, the Tribunal concluded that the denial of CENVAT credit was unwarranted, setting aside the Commissioner (Appeals) order and allowing the appeal in favor of the appellants. The appellants were deemed entitled to the CENVAT credit on the packing material in question, with any consequential relief permitted under the law.