2015 (11) TMI 213 - AT - Central Excise

Denial of CENVAT Credit - Clandestine removal - Shortage of goods - Bogus invoices - Non receipt of actual goods - Held that - there is no dispute that the entire shortage found in the physical stock taken by the officers is less than 5%. The director of the assessee/company also stated that the difference in stock is only due to the accounting method and not due to the clandestine removal. - shortage in the range of /- 5 % should be ignored and it is not justified to confirmed demand on this count. I find that aforesaid judgment is squarely applicable in the present case. Accordingly, following the ratio of the above judgment, I drop the demand in respect of shortage found in the physical stock and consequently penalties commensurate to the duty of such shortage also not sustainable. As regard the duty on debit note, the assesse admittedly paid the duty and not contested. In my considered view, the penalties related to duty on debit note is also not maintainable as there is no suppression of facts on the part of the assessee in respect of non payment of duty on debit note, therefore the department s appeal which is limited to penalties on shortage and debit note does not survive and the same is dismissed. Cenvat Credit - Non receipt of Inputs / raw material - Since the Cenvat Credit was fraudulently availed without receipt of the input the penalties is unavoidably imposable, hence the same is also maintained. I dropped the part of the duty in respect of shortage of material, therefore Shri. Sanjay Agarwal, Director of the assessee/company deserves reduction of penalty, therefore I reduce penalty from ₹ 5 lakhs to ₹ 3 lakhs on Shri. Sanjay Agarwal. In view of my above discussion appeals of the assessees and Shri. Sanjay Agarwal is partly allowed - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Shortage of inputs and finished goods.
2. Wrongful availing of Cenvat Credit without receipt of inputs.
3. Penalties related to duty on shortages and debit notes.

Detailed Analysis:

1. Shortage of Inputs and Finished Goods:
The case involved discrepancies in the stock of finished goods and raw materials during a surprise check by Central Excise officers. The physical verification revealed a shortage of 220.665 MTs of finished goods and 43.044 MTs of raw materials, leading to a demand of Rs. 6,45,401/- in Central Excise duty. The assessee argued that the shortage was due to accounting methods and was within the permissible BIS tolerance limits of +/- 5%. The Tribunal referred to its own previous judgment in the assessee's case, where it was held that shortages within +/- 5% should be ignored. Consequently, the Tribunal dropped the demand related to the shortage of physical stock and the associated penalties.

2. Wrongful Availing of Cenvat Credit:
The assessee had taken Cenvat credit based on invoices issued to different units within the same group, but the inputs were received and used in a different unit. The Tribunal found that the assessee could not provide evidence of re-transportation of inputs from the wrong factory to the correct factory. Therefore, it was clear that the Cenvat credit was availed without the actual receipt of inputs in the respective units. The Tribunal maintained the demand of Cenvat credit for non-receipt of inputs against M/s. Sanvijay Rolling & Engg. Ltd., M/s. Sanvijay Steels Industries Pvt. Ltd., and M/s. Sanvijay Alloys Pvt. Ltd. The penalties for fraudulent availing of Cenvat credit were also upheld.

3. Penalties Related to Duty on Shortages and Debit Notes:
The Commissioner (Appeals) had dropped penalties commensurate to the duty on shortages and debit notes. The Revenue appealed against this decision. The Tribunal found that since there was no evidence of clandestine removal and the demand was within the normal period, the penalties were rightly dropped by the Commissioner (Appeals). The Tribunal dismissed the Revenue's appeal regarding penalties on shortages and debit notes. However, for the penalty imposed on Shri. Sanjay Agarwal, Director of the assessee/company, the Tribunal reduced the penalty from Rs. 5 lakhs to Rs. 3 lakhs, considering the partial dropping of duty related to the shortage of material.

Conclusion:
The Tribunal partly allowed the appeals of the assessees and Shri. Sanjay Agarwal, reducing the penalty on the director. The appeal filed by the Revenue was dismissed. The Tribunal upheld the demand of Cenvat credit for non-receipt of inputs and maintained the penalties for fraudulent availing of Cenvat credit.