2017 (12) TMI 943 - AT - Central Excise

CENVAT credit - damaged inputs / not received inputs in the factory - Held that - the appellants have taken full quantity of inputs and has not returned any damaged goods and they have not rejected any quantity of the inputs. In order to prove they have also produced the stock statements which was not seen by both the authorities and in the show cause notice no short receipt has been alleged - the debit notes are only issued to reduce only certain amounts from the payments due to the supplier and not on account of rejection of goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of Cenvat credit on damaged/ inferior quality raw material.

Analysis:
The appellant, a manufacturer of plastic packing material, raised debit notes for damaged inputs. The issue revolved around availing Cenvat credit only on duty paid inputs used in finished goods manufacture. The lower authority demanded reversal of credit, alleging ineligibility due to lack of evidence on damaged inputs' use. The appellant contended full input usage, supported by batch records and circular No.877/15/2008. The circular clarified credit availability on duty paid inputs, unaffected by subsequent price reductions. The appellant argued debit notes aimed at supplier payment deductions, not goods rejection. The Commissioner (A) upheld the ineligibility, prompting the appeal.

The tribunal noted the appellant's full input usage without returns or rejections, supported by stock statements and unalleged short receipts. The appellant's reliance on the circular was deemed valid, as debit notes aimed at payment deductions, not goods rejection. The tribunal found the impugned order unsustainable, setting it aside and allowing the appeal with consequential relief, if any. The judgment favored the appellant, emphasizing full input usage and circular compliance.

This judgment highlights the importance of maintaining proper documentation to support input usage claims and the relevance of circulars in interpreting tax credit rules. The tribunal's decision underscores the need for clear evidence and adherence to regulatory guidelines in tax credit disputes, ultimately favoring the appellant based on the presented facts and legal interpretations.