2010 (8) TMI 560 - AT - Central Excise

Cenvat credit - Shortages of raw materials - During the search of the factory premises and physical stock verification, certain shortages of raw materials were detected - Said raw material is lying in the factory premises of their sister unit due to shortage of space in their premises on account of rainy season - The Commissioner (Appeals) has observed that once the Cenvat Credit is taken on the raw material, there is no provision in the Cenvat Credit Rules to remove the input from the premises except after debiting of credit so availed. Find that this is not a case of clearance of Modvatable input from the factory premises but it is a case of temporary removal and storage of input in the adjacent factory premises, which is a sister unit of the appellant - The appellate authority has observed that they could have shifted the raw material outside their factory premises by issuing gate pass and reversing the credit and later on taking re-credit as and when they were in a position to bring the raw material back - It becomes clear that this is only a procedural lapse- Such inputs were duly accounted for by the appellant in their statutory record and as such, they were under a legal obligation to show consumption of the same - Conclude that they were removing the goods with mala fide intention, in the absence of any evidence to the contrary, would not be in the interest of justice - Hence, set aside the impugned order and allow the appeal.

Summary

Issues:
1. Disposal of appeals arising from the same facts and circumstances regarding shortages of raw materials.
2. Ownership of goods stored in sister unit and procedural lapses.
3. Challenge to duty liability due to temporary storage of goods in adjacent factory premises.
4. Interpretation of Cenvat Credit Rules regarding removal of inputs from premises.
5. Comparison with relevant tribunal decisions to support appellant's case.
6. Setting aside the impugned order and granting relief to the appellants.

Analysis:
1. The appeals were disposed of collectively as they stemmed from the detection of shortages of raw materials, specifically Polyester Oriented Yarn (POY), at the premises of two manufacturing units. The General Manager admitted that the raw material was stored in the sister unit due to space constraints during the rainy season, leading to proceedings for confirming Modvat amount as the input was cleared without reversing the credit.

2. The appellants argued that the ownership of the goods was not disputed by the Revenue, emphasizing a procedural lapse. They contended that had they sought permission to store the inputs temporarily in the sister unit, no duty liability would have arisen against them, citing a Commissioner's order in favor of another entity in a similar situation.

3. The Commissioner (Appeals) acknowledged the ownership of the goods but highlighted the lack of provision in the Cenvat Credit Rules for removing inputs without debiting the credit. However, it was clarified that the case involved temporary storage in the adjacent factory premises, not clearance, suggesting a procedural error rather than malintent.

4. The appellate authority suggested that the appellants could have shifted the raw material by following proper procedures, such as issuing gate passes and reversing credits. The absence of evidence supporting malice led to a comparison with tribunal decisions where similar actions were deemed procedural lapses rather than deliberate violations.

5. Relying on precedents, the judgment favored the appellants, setting aside the impugned order and granting them relief due to the procedural nature of the lapse and the lack of evidence supporting malicious intent.

6. Ultimately, the judgment pronounced on 25-8-2010 concluded by overturning the lower authorities' decisions and providing consequential relief to the appellants, emphasizing the importance of procedural compliance and evidence in determining duty liabilities.