2015 (6) TMI 1010 - AT - Central Excise

Denial of Cenvat credit on the goods found short - shortage of imported melting scrap was found short during the course of physical verification of scrap - Held that - The contention of the assessee is correct as the huge stock of 639 MT cannot be weighed in a single day physically. Moreover, the reasons for shortage has been explained by Shri Ashok Kumar Jain that scrap is having dust, cemented material, good, etc., and there is a burning loss during the course of manufacturing process. Revenue has not contravened these facts in their appeal. Therefore, the allegation that the short found imported scrap has been sold clandestinely without any corroborative or supporting evidence is not sustainable. In these set of facts, set aside the confirmation of demand of ₹ 2,79,964/- on account of shortage of inputs found on 10-8-2005. - Decided in favour of assessee Fraudulent Cenvat credit on re-rollable scrap - denial of claim as same has not been received by the assessee in their factory and taken only invoices from the supplier of the goods - Held that - Commissioner (A) has correctly analyzed the issue and hold that Cenvat credit on re-rollable scrap cannot be denied merely on the basis of the statement of the transporters or vehicles are found to be non-existent. Further, Revenue has failed to produce any corroborative evidence. In these circumstances, find that demand is not sustainable against the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the assessee correctly availed Cenvat credit on 140.60 MT of imported scrap found short during physical verification.
2. Whether the assessee availed fraudulent Cenvat credit on re-rollable scrap not received in their factory but taken only on invoices from the supplier.

Issue-wise Detailed Analysis:

1. Availment of Cenvat Credit on Imported Scrap:
The first issue revolves around the 140.63 MT of imported steel scrap found short during stock verification. The assessee contended that the shortage was due to burning loss, as the imported scrap contained non-metallic materials like dust and cemented material. They argued that the weighment of 639.051 MT in a single day was not feasible, and the shortage could be attributed to the approximate basis of issuing inputs for manufacturing. The Tribunal agreed with the assessee, noting that the Revenue did not provide weighment slips or charts to counter the assessee's claims. The Tribunal found the explanation of burning loss credible and set aside the demand of Rs. 2,79,964/- for the shortage of inputs.

2. Alleged Fraudulent Cenvat Credit on Re-rollable Scrap:
The second issue concerned the denial of Cenvat credit amounting to Rs. 17,09,923/- on re-rollable material, alleging it was not received in the factory and was diverted to small-scale re-rolling mills. The Revenue's case was based on the non-existence of transporters and incorrect vehicle numbers on invoices. However, the Tribunal found that the Revenue failed to provide corroborative evidence of the alleged diversion. The Tribunal noted that the dealers only denied transporting the goods but not selling them to the assessee. The Tribunal also observed that the adjudicating authority had inconsistently accepted some re-rollable material as input while denying credit for others without sufficient reasoning. The Tribunal upheld the Commissioner (A)'s analysis, which found no substantial evidence to support the Revenue's claims and thus, set aside the demand of Rs. 17,09,923/-.

Conclusion:
The Tribunal confirmed the demand of Rs. 30,062/- along with interest against the assessee and imposed a penalty equal to Rs. 30,062/-. However, penalties on the Director and Excise In-charge were not imposed. The Revenue's appeals were dismissed, and the assessee's appeal was allowed.

Pronouncement:
The judgment was pronounced in the open court on 5-6-2015.