2015 (6) TMI 987 - AT - Central Excise

Shortages of stock - removal of inputs clandestinely - Held that - It is admitted fact that during the course of verification of stock of inputs, there was shortages and have been explained by the Director that these shortages were due to the reason that they have not taken their stock position since long. It is also a fact that process of manufacturing of appellant is like that where HDPE granules goes waste. The appellant has paid duty on the shortages at the time of investigation itself. But the contest done by the appellant on issuance of show cause notice shows the intent of the appellant. In this case, inputs were found short but same has been explained by the Director that as they have not taken the stock position since long, that might be the reason of shortage. These facts have not been appreciated by the lower authorities. In these circumstances, I rely on the decision of Nissan Thermoware P. Ltd. (2010 (12) TMI 487 - GUJARAT HIGH COURT) that held that in the absence of any cogent evidence of removal of inputs clandestinely, the cenvat credit cannot be denied on shortage of inputs to the appellants. - Decided in favour of assessee

Summary

Issues:
Appeal against confirmed duty demand on shortage of inputs found during verification.

Analysis:
The case involved an appeal against an order confirming duty demand on shortages of inputs found during a verification visit to the appellant's premises. The appellant, a manufacturer of plastic pipes and HDPE granules, had a discrepancy in stock during a verification in 2009, where physical stock was less than the recorded stock. The Director of the appellant admitted to the shortages but attributed them to not updating stock records regularly. The appellant paid duty on the shortages, but contested the show cause notice, denying clandestine removal of goods. The appellant argued that without concrete evidence of clandestine clearance, duty cannot be demanded, citing legal precedents. The Revenue, however, contended that the appellant's admission of guilt was sufficient, referencing a different legal decision to support their stance.

The Tribunal considered the arguments from both sides. It acknowledged the admitted shortages but emphasized that the burden of proving clandestine removal rested on the Revenue. The Tribunal noted the appellant's explanation for the shortages and the absence of concrete evidence supporting clandestine removal. It distinguished the legal precedents cited by the Revenue, highlighting that those cases involved different circumstances, such as unaccounted cash or finished goods shortages, not relevant to the current case of input shortages. The Tribunal relied on a specific legal decision to support its conclusion that without cogent evidence of clandestine removal, denying cenvat credit on input shortages was unwarranted. Consequently, the impugned order confirming duty demand was set aside, and the appeal was allowed with any necessary consequential relief.

In conclusion, the Tribunal's judgment focused on the burden of proof regarding clandestine removal of goods, emphasizing the lack of concrete evidence in the case at hand. By considering the specific circumstances and legal precedents, the Tribunal ruled in favor of the appellant, highlighting the importance of substantiated claims in duty demand cases involving input shortages.