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2016 (4) TMI 373 - AT - Central ExciseReversal of Cenvat credit - Inputs found short in the factory premises of the appellant - Appellant contended that shortages found in the factory premises were written off as per Cost Accounting System so demand of duty cannot be made because the period of demand is 2002-03 to 2005-06 and the provisions for reversal of CENVAT Credit with respect to shortages in inputs and capital goods on writing off was introduced as per Notification No.26/2007-CE(NT) dated 11.05.2007 hence no CENVAT Credit is required to be reversed Held that - the shortages written off by the appellant were never found available in the factory premises of the appellant. It is observed that writing off amount and the shortages were detected by the departmental officers during audit and scrutiny of the Cost Audit Reports, accordingly extended period is applicable. Also, it is observed that option of payment of 25% reduced penalty under Section 11AC of the Central Excise Act, 1944 is not extended to the appellant. The same is extended to the appellant subject to the condition that the entire demand along with interest and 25% reduced penalty is paid within 1(one) month from the date of receipt of this Order. - Decided partly in favour of appellant
Issues:
1. Denial of CENVAT Credit to the Appellant. 2. Requirement of CENVAT Credit reversal for shortages found in the factory premises. 3. Applicability of case laws and notifications related to CENVAT Credit reversal. 4. Bar on limitation for demand. Analysis: 1. The Appellant challenged the denial of CENVAT Credit based on shortages found in their stock during a Statutory Audit. The Appellant argued that shortages were written off, and thus no duty demand should apply due to the introduction of Rule 5B in the CENVAT Credit Rules, 2004. The Appellant cited various case laws supporting the argument that reversal of CENVAT Credit is only necessary post the introduction of relevant provisions. 2. The main issue revolved around whether CENVAT Credit should be reversed for shortages in the factory premises. The Appellant contended that since shortages were written off as per the Cost Accounting System, no reversal was required. However, the Revenue argued that shortages were not found in the factory, and therefore, CENVAT Credit reversal was necessary. The Tribunal noted that the Appellant's reliance on case laws where inputs were available in the factory did not apply to the present case, as shortages were never located in the factory. 3. The Tribunal examined the applicability of Notification No.26/2007-CE(NT) dated 11.05.2007, which mandated CENVAT Credit reversal for written-off inputs. While the Appellant relied on case laws supporting their stance, the Tribunal differentiated the present case where shortages were not present in the factory. The Tribunal highlighted the judgment of the Hon'ble Madras High Court in ASCO (India) Ltd. v. CEGAT, Chennai, emphasizing that in such situations, CENVAT Credit reversal was necessary. 4. Regarding the limitation on demand, the Tribunal observed that the shortages were detected during audit and scrutiny, justifying the application of the extended period. The Appellant's argument on limitation was dismissed, and the Tribunal directed the Appellant to pay the entire demand, interest, and a 25% reduced penalty within one month. The Tribunal ultimately dismissed the Appeal, except for extending the option of reduced penalty under Section 11AC of the Central Excise Act, 1944. This detailed analysis of the judgment highlights the arguments presented by both parties, the application of relevant laws and notifications, and the Tribunal's reasoning for the decision on each issue involved.
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