2013 (4) TMI 248 - AT - Central Excise

Admissibility of credit in respect of alleged short quantities received through pipelines without allowing adjustments for excess quantities received Cenvat Credit - Held that - tolerance in respect of hygroscopic volatile and such other cargo have also to be allowed as per industry norms excluding however unreasonable and exorbitant claims. Similarly minor variations arising due to weighment by different machine will also have to be ignored if such variations are within tolerance limit. Therefore appeal was to be returned to the original authority to view the matter in the light of the cited decision of the Larger Bench in Commissioner of Central Excise Chennai vs Bhuwalka Steel Industries Ltd 2009 (11) TMI 177 - CESTAT CHENNAI LB .

Summary

Issues:
Admissibility of credit for alleged short quantities received through pipelines without allowing adjustments for excess quantities received.

Analysis:
The judgment deals with the admissibility of credit regarding alleged short quantities received through pipelines without considering adjustments for excess quantities received. The impugned order was issued before the Larger Bench's order in the case of Commissioner of Central Excise, Chennai vs Bhuwalka Steel Industries Ltd., which established guidelines for dealing with various types of shortages concerning the allowance of credit under Rule 3(1) of the CENVAT Credit Rules. The Larger Bench emphasized that different types of shortages cannot be addressed uniformly, and the decision to allow credit depends on various factors such as diversion of inputs en-route, nature of goods, countable pieces or packages, weighment differences, and compensation claims for shortages. The judgment stressed the need to evaluate each case on its merits without a fixed standard for different types of shortages.

The Tribunal set aside the impugned order and remanded the matter to the original authority for a fresh decision in light of the Larger Bench's guidelines. The counsel argued against imposing a penalty, citing no allegations of diversion. The Tribunal directed the original authority to determine shortages and quantities dispatched by the supplier through pipelines. The appeal was allowed by remand, indicating a need for a fresh assessment considering the factors outlined by the Larger Bench. The issue of penalties was left for the original authority to decide after addressing the shortage matter thoroughly.

In conclusion, the judgment underscores the importance of considering various factors in determining the admissibility of credit for shortages, highlighting the need for a case-by-case evaluation without rigid standards. The remand decision emphasizes the application of the Larger Bench's guidelines and the examination of all relevant factors before reaching a final decision on credit admissibility and potential penalties.