2006 (11) TMI 79 - AT - Central Excise

Cenvat/Modvat- Department alleged that assessee was taking full credit of duty as per the invoices. Even in exceptional cases and accordingly disallowing credit and imposing penalty & interest- Matter remanded for fresh decision.

Issues Involved:
1. Short receipt of inputs due to weighbridge differences.
2. Shortage of inputs on account of transcription error.
3. Genuine shortages subsequently made good with excess supply by the supplier.
4. Inputs initially rejected but accepted later.
5. Inputs returned to the supplier under an invoice after debiting the credit.
6. Rejected items lying with the assessee.
7. Imposition of penalty for availing ineligible credit.

Detailed Analysis:

Short receipt due to weighbridge differences:
The Tribunal noted that shortages within the 1 to 2% range due to weighbridge differences are normal and should not be considered as short receipt of inputs if the supplier is not debited for the proportionate price. The Tribunal relied on the precedent set in Neera Enterprises v. CCE, 1998 (104) E.L.T. 382, which held that minor differences due to weighing on different scales should not disallow Modvat credit. Consequently, the Tribunal allowed the benefit of credit under this head.

Shortage on account of transcription error:
The Tribunal recognized that transcription errors could occur, especially with semi-literate staff. However, the original authority found that such shortages were often made good by excess supply without proper duty-paying documents. The Tribunal directed that if the assessee could establish with supporting evidence (GRN, weighment slips, commercial invoices, ledger) that the shortages were transcription errors and not compensated monetarily, the original authority may allow the benefit of credit after verifying the bona fide nature of each claim.

Genuine shortages subsequently made good with excess supply by the supplier:
The Tribunal upheld the original authority's decision that credit could not be allowed for shortages made good by excess supply without excise invoices. The practice of adjusting shortages with excess supply without proper documentation was deemed irregular and not permissible under the Cenvat Credit Rules.

Inputs initially rejected but accepted later:
The Tribunal allowed credit for inputs initially rejected but later accepted if it was established that the debit initially made against the supplier was reversed by issuing Re-GRN, commercial invoices, credit notes, and corresponding ledger adjustments. The Tribunal directed that the assessee be given another opportunity to produce satisfactory evidence to establish their claims for such credits.

Inputs returned to the supplier under an invoice after debiting the credit:
The original authority allowed credit in cases where the assessee submitted a copy of the invoice for the return or rejection of goods on payment of duty. The Tribunal upheld this decision, noting that credit taken initially was not denied in such cases.

Rejected items lying with the assessee:
The Tribunal affirmed the original authority's decision to allow credit for inputs lying with the assessee that were initially rejected. The presence of such inputs in the factory at the time of inspection justified the allowance of credit.

Imposition of penalty for availing ineligible credit:
The Tribunal acknowledged that the assessee availed ineligible credit knowingly, justifying the imposition of penalty along with the demand for credit and interest. However, considering the fact that the department did not establish the removal of credit-availing inputs from the factory without paying duty, the Tribunal found that a penalty equal to the credit determined was not warranted. The matter was remanded for a fresh decision on the penalty amount.

Conclusion:
The Tribunal allowed the appeal by way of remand for a fresh decision, directing the original authority to reassess the credit claims under the various heads discussed and to reconsider the penalty imposed. The decision emphasized the need for proper documentation and adherence to the Cenvat Credit Rules to justify credit claims.

← Previous Next →