2010 (12) TMI 367 - HC - Central Excise

CENVAT credit - Inputs - short receipt of goods - Held that in the absence of any evidence to indicate short receipt of material merely because there is some discrepancy between the quantity stated in the invoice and that shown in the 3-CD report it cannot be presumed that there was in fact short receipt of raw material - It is not possible to state that the conclusion arrived at by the Tribunal is in any manner unreasonable so as to warrant interference - The appeal of department accordingly dismissed.

Summary

Issues:
- Challenge to order under Section 35(G) of the Central Excise Act, 1944
- Admissibility of CENVAT credit for short quantity of raw material
- Validity and binding nature of Form 3-CD Tax Report
- Burden of proof on the assessee regarding short receipt of raw material
- Consideration of process loss in manufacturing
- Tribunal's decision on shortage of raw material and CENVAT credit

Analysis:

In this case, the appellant-revenue challenged an order under Section 35(G) of the Central Excise Act, 1944, regarding the admissibility of CENVAT credit for a short quantity of raw material. The respondent-assessee, engaged in manufacturing plastic products, had furnished a Form 3-CD Tax Report revealing a short receipt of raw material, leading to a show cause notice for recovery of CENVAT credit. The Commissioner (Appeals) allowed the appeal of the revenue, confirming the demand and penalty. However, the Tribunal set aside this decision, prompting the revenue's appeal.

The main contention was the validity and binding nature of the Form 3-CD Tax Report, which the revenue argued as a statutory admission by the assessee. The Commissioner (Appeals) emphasized the onus on the assessee to prove the short quantity was due to process loss. The adjudicating authority considered whether the shortage was due to short receipt of raw material or process loss, noting the admissibility of CENVAT credit for process loss. The Tribunal found the revenue's case solely based on the 3-CD Report, lacking corroborative evidence on short receipt of raw material.

The Tribunal's decision rested on the absence of evidence indicating a shortage of raw material apart from the 3-CD Report. It highlighted the lack of excess credit availed by the assessee and acknowledged process loss during manufacturing. The Tribunal criticized the Commissioner (Appeals) for relying on assumptions rather than concrete evidence. It concluded that the benefit of yield loss should be extended to the assessee, given the absence of diversion of goods and proper utilization of inputs in the manufacturing process.

Ultimately, the Tribunal's decision was deemed reasonable, with no substantial question of law arising from the case. The appeal was dismissed, affirming the Tribunal's findings on the shortage of raw material and the admissibility of CENVAT credit based on the available evidence and lack of proof of short receipt of material.