2016 (11) TMI 1343 - AT - Central Excise

Recovery of inadmissible CENVAT Credit - shortage of raw materials, Aluminium scrap - whether the appellant is ineligible to avail CENVAT Credit of the aluminium scrap allegedly received short during the period in question? - Held that - It is undisputed that the aluminium scrap covered under the 14 Bills of Entry were received in container in the factory premises of the appellant and there is no allegation in the show-cause notice nor there are any findings that the said containers were diverted enroute. On to totality of shortages, as in this case, I find that the shortage of 0.0041% of total receipt is during the period in question is very-very negligible. Such negligible shortage cannot be held against appellant for denial of CENVAT Credit of duty paid on the imported inputs. I find that the issue is now squarely covered by the decision of the Larger Bench of the Tribunal in the case of Bhuwalka Steel Industries Ltd. 2009 (11) TMI 177 - CESTAT, CHENNAI LB , wherein the Larger Bench has held that the CENVAT Credit cannot be denied only on specific allegations as may indicated in the said order. Appeal allowed - decided in favor of appellant.

Summary

Issues: Recovery of inadmissible CENVAT Credit on shortage of raw materials

The judgment revolves around the recovery of inadmissible CENVAT Credit amounting to ?3,82,510 on the shortage of raw materials, specifically aluminium scrap imported through various Bills of Entry between June 2006 and March 2008. The Revenue contended that the shortage was detected during a factory visit. The appellant argued that they never imported aluminium scrap during the said period, instead procuring it domestically. They received 14 consignments of aluminium scrap during the period in question, with a shortage of 0.0041% attributed to the weighing process conducted outside due to the absence of a weighing bridge on their premises. The appellant cited possible calibration discrepancies in the weighing process and referenced tribunal decisions supporting their case.

The tribunal considered whether the appellant could avail CENVAT Credit for the allegedly short-received aluminium scrap. It was noted that the scrap was received in containers at the factory premises without any diversion en route. The tribunal found the 0.0041% shortage to be negligible and not substantial enough to justify denying CENVAT Credit for duty paid on the imported inputs. The tribunal relied on a previous decision by the Larger Bench, which established that CENVAT Credit cannot be denied solely based on specific allegations without substantial evidence. Consequently, the tribunal held the impugned order to be unsustainable and allowed the appeal, setting aside the initial order.