2011 (2) TMI 198 - AT - Central Excise

Cenvat credits - The first SCN invoked the extended period of limitation by alleging that the noticee had suppressed short-receipts of HR Coils with an intent to avail inadmissible credit fraudulently for evading payment of duty on final product - It is an admitted fact that the lorryloads of HR Coils which were received at the respondent s factory were weighed on their weighbridge and the net weights of the material were recorded in the HR Coil Receipt Register maintained by the respondent - he actual shortage of material, as found on comparison of the invoices with the HR Coil Receipt Register , is 0.02 per cent to 0.04 per cent only, which is within the above tolerance limit - There can be not doubt, the burden of proof regarding admissibility of CENVAT credit is on the claimant as laid down under the relevant rule - it cannot be Ignored that Parliament recognized the possibility of occurrence of an error in weighment on weighbridges and, accordingly, provided for prescription of different tolerance limits for weighbridges of different capacities - Appeal is dismissed

Issues Involved:
1. Admissibility of MODVAT/CENVAT credit on the quantity of HR Coils received.
2. Applicability of tolerance limits for weighbridges in determining the quantity of HR Coils received.
3. Invocation of the extended period of limitation due to alleged suppression of facts.
4. Validity of invoices and the burden of proof for claiming MODVAT/CENVAT credit.
5. Relevance of previous judicial decisions to the present case.

Detailed Analysis:

1. Admissibility of MODVAT/CENVAT Credit on the Quantity of HR Coils Received:
The primary issue was whether the MODVAT/CENVAT credit could be allowed for the entire quantity of HR Coils as shown in the invoices, despite discrepancies in weight recorded at the factory. The department argued that credit should only be allowed for the quantity actually received and used in the manufacture of the final product. The respondent contended that the variation in weight was within tolerance limits and thus should not affect the credit eligibility.

2. Applicability of Tolerance Limits for Weighbridges:
The respondent argued that the differences in weight were due to the use of different weighbridges at the supplier's end and their factory, which had different tolerance limits certified by the Legal Metrology Department. The Tribunal's Larger Bench in CCE v. Bhuwalka Steel Industries Ltd. held that minor variations due to weighment by different machines within tolerance limits should be ignored. The variations in this case were within the prescribed tolerance limits, thus supporting the respondent's claim.

3. Invocation of the Extended Period of Limitation:
The department issued show-cause notices invoking the extended period of limitation, alleging suppression of facts with intent to avail inadmissible credit. However, the Tribunal found no evidence of intent to defraud or suppress facts. The variations in weight were within tolerance limits and did not indicate any fraudulent activity.

4. Validity of Invoices and Burden of Proof for Claiming MODVAT/CENVAT Credit:
The Tribunal emphasized that the burden of proof for claiming credit lies with the claimant. The respondent successfully discharged this burden by producing valid invoices and certificates from the Legal Metrology Department. The Tribunal noted that the validity of the invoices was never questioned, distinguishing this case from others where invalid invoices were used.

5. Relevance of Previous Judicial Decisions:
The Tribunal referred to its Larger Bench decision in Bhuwalka Steel Industries Ltd., which supported the respondent's case. The Tribunal also considered the High Court's decision in Bhilwara Spinning Ltd., which held that unless invoices were found to be wrong or inputs diverted, the entire duty paid on inputs should be credited. The decisions cited by the department were found to be distinguishable as they involved invalid invoices or unproven claims of diversion.

Conclusion:
The Tribunal concluded that the variations in weight due to different weighbridges were within tolerance limits prescribed under the Standards of Weights & Measures Act and could be ignored. The entire quantity of HR Coils covered by the invoices was deemed to have been received and used in the manufacture of the final product, making the MODVAT/CENVAT credit admissible. The appeal by the department was dismissed, and the decision of the Commissioner (Appeals) was sustained.

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