2011 (5) TMI 765 - AT - Central Excise

Excess credit on inputs availed - alleged that the appellant had availed CENVAT credit on the entire quantity mentioned on the Central Excise invoices and not on the actual quantity received in contravention of Rule 3 of CENVAT Credit Rules Held that - measurement at the end of the supplier was found excess and at the end of appellant was found short which is well within the permissible limit of tolerance as per the Standards of Weights and Measures Act 1976. There is no allegation against the appellant that the inputs have been diverted enroute or not received in the factory of the appellant as per Central Excise invoices appellant has taken the CENVAT credit correctly as per Central Excise invoice appellant is not required to reverse the credit appeal is allowed

Summary

Issues:
Demand of duty along with interest and penalty on account of availing excess credit on inputs.

Analysis:
The appellant, a manufacturer of excisable goods, filed an appeal against an order confirming the demand of duty, interest, and penalty due to availing excess credit on inputs, specifically grey fabrics. The allegation was that the appellant received a short quantity of grey fabrics compared to what was mentioned on the Central Excise invoices. The appellant had recovered processing charges based on the actual quantity received but had availed CENVAT credit on the entire quantity mentioned on the invoices. A show-cause notice was issued, demands were confirmed, and penalties imposed. The appellant defended by stating that the shortages were negligible and within tolerance limits, relying on the Standards of Weights and Measures Act and a precedent decision. The Department argued that credit should only be on the actual quantity received as per Rule 3 of the CENVAT Credit Rules, citing relevant case law.

The Tribunal examined the submissions and noted that the appellant had taken excess credit on inputs compared to the actual receipt of grey fabrics as per the invoices. The appellant relied on a Larger Bench decision that discussed various factors to consider in such cases, including the nature of goods, weighment differences, compensation claims, etc. The Tribunal found that the measurement discrepancies were within tolerance limits as per the Standards of Weights and Measures Act. Since there was no allegation of diversion of inputs en-route or non-receipt at the factory, the tests laid down by the Larger Bench were applicable. The Tribunal distinguished the case law cited by the Department, stating it was not relevant to the current situation. Consequently, the Tribunal held that the appellant had correctly availed CENVAT credit as per the invoices and was not required to reverse the credit. The impugned order was set aside, and the appeal was allowed with consequential relief.