2017 (2) TMI 475 - HC - Central Excise

MODVAT credit - Whether Tribunal substantially erred in law in holding that Modvat credit can be allowed in respect of quantity of inputs not actually received and accordingly not used in or in relation to the manufacture of final product? Held that - there was no material on record to suggest that any illicit diversion of the Cenvated inputs had been made for uses other than use in the manufacture of the finished goods - The tribunal also recorded that there was no illegal diversion of the items received and a mere minor loss in transit or a difference in the weight due to differences in weighing scale or in dip reading, would not lead to the conclusion that there was any illegal diversion or that the assessee was claiming Cenvat credit on any item on which it sought the credit - credit allowed - appeal dismissed - decided in favor of assessee.

Summary

Issues:
Whether Modvat credit can be allowed for inputs not actually received and used in the manufacture of the final product.

Analysis:
The judgment pertains to a department's appeal under section 35 G of the Central Excise Act, 1944, challenging a tribunal's order dated 23rd March, 2009. The primary issue revolves around the allowance of Modvat credit for inputs not actually received and utilized in the manufacturing process. The tribunal concluded that the assessee was entitled to Cenvat credit based on the verification process conducted while receiving various materials like C.P. Coke, Hard Pitch, Silicon Metal, Furnace Oil, and Light Diesel Oil. The tribunal noted that the assessee had checked the quantity of goods on the weighing scale, recorded any variations, and there was minimal discrepancy ranging from 0.08% to 0.38%. Importantly, there was no evidence of illicit diversion of the inputs for purposes other than manufacturing the final goods.

The tribunal's decision was based on the absence of any material suggesting illegal diversion of the received materials and the fact that the Cenvat credit claimed was solely for materials used in the manufacturing process. The tribunal emphasized that minor discrepancies in weight due to transit losses or variations in weighing scales did not imply any unauthorized use of the inputs. Consequently, the tribunal allowed the Cenvat credit to the assessee, deeming the weight differences insignificant and ruling out any allegations of illicit diversion.

Ultimately, the High Court upheld the tribunal's findings, stating that no substantial question of law arose from the conclusions drawn by the tribunal. As a result, the appeal was dismissed, affirming the decision to allow the Cenvat credit to the assessee based on the factual findings and lack of evidence supporting any illegal diversion of inputs.