2010 (5) TMI 727 - AT - Central Excise

Summary

Issues:
Shortage of raw material in factory leading to Cenvat Credit reversal and penalty imposition.

Analysis:
The case involved a shortage of 31.171 MTs of raw material in the factory, leading to the reversal of Cenvat Credit and imposition of a penalty. During the visit of officers, the partner of the appellant attributed the shortage to transit loss and voluntarily reversed the Cenvat Credit. However, the appellant argued that the shortage was due to differences in weighment declared in the invoice, as the goods were purchased from ship breaking yards. The appellant contended that without proof of diversion or non-receipt of raw material, the Cenvat Credit reversal and penalty imposition were unjustified. The appellant relied on a Tribunal decision to support the argument that differences in input weight should not lead to disallowance of Modvat Credit.

Upon considering the submissions, the judge noted that the partner had explained the shortage as a result of accounting procedures and invoice discrepancies. The judge emphasized that the department failed to verify the claim by checking records for separate weighment. Without evidence of diversion or admission by the appellant, the burden was on the department to prove non-receipt or non-payment of duty on the raw material. Consequently, the judge ruled in favor of the appellant, stating that the demand could not be sustained, and allowed the appeal.

Additionally, the Revenue appealed against the Commissioner's decision to set aside the penalty under Rule 15(2) of the Central Excise Rules. Given the ruling in favor of the appellant regarding the duty demand, the judge concluded that the question of upholding the penalty did not arise. Therefore, the Revenue's appeal was rejected, aligning with the decision on the appellant's appeal.