2017 (8) TMI 1379 - AT - Central Excise

CENVAT credit on inputs short received - assessee had claimed CENVAT credit on base oil as per the invoice quantity which was in excess of that entered in the internal records of the appellant - availment to the extent of permitted tolerance - re-credit - Held that - The issue is covered by the decision of the Larger Bench of the Tribunal in Commissioner of Central Excise, Chennai v. Bhuwalka steel Industries Ltd 2009 (11) TMI 177 - CESTAT, CHENNAI LB wherein held different types of shortages cannot be dealt with according to any one inflexible and fixed standard for the purpose of allowing credit under Rule 3(1) of the Cenvat Credit Rules. Decision to allow or not to allow credit in any particular case will depend on various factors. In the absence of any exercise having been carried out before issue of the show cause notice or examination in the orders of the lower authorities, the claim of Revenue to set aside the impugned orders is not tenable - appeal dismissed.

Summary

Issues involved:
- Availment of CENVAT credit on short-received inputs

Detailed Analysis:
The dispute in these appeals revolves around the availment of CENVAT credit on inputs that were short-received by M/s Indian Oil Corporation Limited. The appellant had claimed CENVAT credit on base oil based on the invoice quantity, which exceeded the quantity recorded in their internal documents. The jurisdictional authorities initiated proceedings for recovery due to the discrepancy between the received quantity and the documented quantity, citing non-conformity with the rules. The original authority confirmed demands and imposed penalties, while the first appellate authority allowed credit to the extent of permitted tolerance and directed re-credit of the duty on short-receipts.

The main contention raised by the Revenue is that the first appellate authority erred in allowing credit for the duties on base oil that fell short of the invoiced quantity to the extent permitted as tolerance. This issue is addressed by referring to a decision of the Larger Bench of the Tribunal in Commissioner of Central Excise, Chennai v. Bhuwalka Steel Industries Ltd. The decision emphasizes that different types of shortages cannot be dealt with using a fixed standard and that the decision to allow or disallow credit depends on various factors, including whether the goods have been diverted en-route, the nature of the goods, the countable number of pieces or packages received, and whether compensation for the shortage has been claimed from relevant parties.

The Tribunal found that no detailed exercise was conducted before the issuance of the show cause notice or in the orders of the lower authorities regarding the factors mentioned in the decision cited. Consequently, the claim of the Revenue to set aside the impugned orders was deemed untenable, leading to the dismissal of the appeals.