2009 (3) TMI 684 - AT - Central Excise

Cenvat/Modvat credit - difference in quantity of Inputs - Held that - it is clear that the settled legal position is that Cenvat credit to the extent of full amount of duty shown in the supplier s invoice is permissible, even if the quantity actually received is somewhat short provided the shortage is meagre, attributable to difference in weighing scales and/or transit loss due to evaporation in case of liquids, and there is no evidence of deliberate illicit diversion. In this case, the shortage of 0.08% to 0.38% is meagre-attributable to difference in weighing scales or transit loss in case of LDO/furnace oil and there is absolutely no allegation of illicit diversion of the cenvated inputs - reversal of credit on 0.08% - 0.38% shortage on receipt of inputs is not called for - appeal allowed.

Summary

Issues:
Appeal against order confirming Cenvat credit demand, interest, and penalty - Dispute over receipt of inputs - Applicability of Cenvat credit rules - Allegation of short receipt of inputs - Denial of credit based on weighment records - Discrepancies in quantity received - Legal interpretation of Modvat credit rules.

Analysis:
The case involves an appeal against an order confirming Cenvat credit demand, interest, and penalty imposed on the Appellant for alleged discrepancies in the receipt of inputs. The dispute revolves around the receipt of C.P. Coke, Hard Pitch, Silicon Metal, Furnace Oil, and Light Diesel Oil during a specific period. The Appellant procured duty paid inputs for manufacturing Aluminium and its products, claiming Cenvat credit. The central issue is the discrepancy between the quantity mentioned in invoices and the actual quantity received at the factory, leading to the denial of credit by the Department.

The Appellant argued that the differences in weighment records were due to variations in weighing scales used by suppliers and at their premises, which are within acceptable norms. They contended that the discrepancies were minor, ranging from 0.08% to 0.38%, common in the industry, and should not result in credit denial. Citing legal precedents, including judgments from the Hon'ble Rajasthan High Court and Tribunal cases, the Appellant emphasized that credit cannot be denied if inputs are not diverted and used for intended manufacturing purposes.

On the other hand, the Department, represented by the JCDR, reiterated that Modvat credit is only available for the actual quantity of inputs used in manufacturing. They argued that since a certain quantity was not received as per records, credit denial was justified. However, the Tribunal analyzed the submissions and records, noting that the discrepancies were minimal and likely due to differences in weighing scales or dip reading for liquid inputs. Importantly, there was no evidence of deliberate diversion of inputs, as highlighted in legal judgments supporting the Appellant's position.

Ultimately, the Tribunal held that the denial of credit based on minor discrepancies in quantity, without any indication of illicit diversion, was unjustified. Citing various legal precedents, the Tribunal concluded that the Appellant was entitled to Cenvat credit for the full amount shown on supplier invoices, even if the actual quantity received was slightly less. The impugned order was deemed unsustainable, set aside, and the appeal was allowed in favor of the Appellant.

In summary, the judgment underscores the importance of considering industry norms, lack of evidence of diversion, and legal precedents in determining the eligibility of Cenvat credit, especially in cases involving minor discrepancies in the receipt of inputs.