2004 (6) TMI 522 - AT - Central Excise

Summary

Issues: Denial of Cenvat credit, Penalty imposition, Discrepancy in input quantities, Pre-deposit waiver

Denial of Cenvat Credit:
The case involves the denial of Cenvat credit of Rs. 11,75,355/- to the appellants for certain quantities of Orthoxylene and Benzene imported between July 2002 to June 2003. The denial was based on the argument that the differential quantities of inputs were not received in the factory and not utilized in the final product manufacture. The appellant claimed that the shortage was due to natural causes, specifically evaporation in transit, and was less than 1% of the quantities cleared at Customs. The appellant cited legal precedents to support their case, emphasizing similar allowances made in cases of input loss in transit. However, the Departmental Representative (DR) opposed these arguments, relying on other tribunal decisions that supported denying Modvat credit for quantities not received in the factory.

Penalty Imposition:
In addition to the denial of Cenvat credit, the authorities imposed a penalty of Rs. 2,00,000/- on the appellants. This penalty was likely connected to the discrepancy in input quantities and the alleged failure to utilize the imported inputs in the final product manufacturing process.

Discrepancy in Input Quantities:
The core issue revolves around the discrepancy in the quantities of Orthoxylene and Benzene inputs imported by the appellants and the quantities that were actually received in the factory for manufacturing purposes. The authorities contended that the shortfall in quantities was not justifiable and led to the denial of Cenvat credit and the imposition of the penalty. The appellant attributed this shortage to natural causes, particularly evaporation during transit, and sought to establish that the variance was minimal and did not impact the overall production process significantly.

Pre-deposit Waiver:
The appellants sought a waiver of pre-deposit and a stay of recovery concerning the duty and penalty amounts involved in the case. While the Tribunal acknowledged the arguable nature of the case due to conflicting decisions from different benches, they did not find a strong prima facie case to warrant a full waiver of pre-deposit and stay of recovery. Consequently, the appellants were directed to pre-deposit an amount of Rs. 5,00,000/- within six weeks for further compliance.

This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT, Chennai, highlights the key issues of denial of Cenvat credit, penalty imposition, discrepancy in input quantities, and the decision regarding the pre-deposit waiver request.