2018 (1) TMI 966 - AT - Central Excise

Clandestine removal - shortage of stock - expendable polystyrene - Held that - the issue is no more res-integra and has been settled by the Hon ble High Court of Allahabad in the case of Commr. Vs. Minakshi Castings 2011 (8) TMI 896 - ALLAHABAD HIGH COURT laying down that mere shortages, in the absence of any corroborative evidence, cannot lead to findings of the clandestine removal - demand in the present case is only based upon the shortages and cannot be upheld. CENVAT credit - duty paying documents - denial on the ground that input supplier was not having complete machineries to manufacture the goods - Held that - the appellants have taken a categorical stand that the invoices in question contained the duty paying particulars and the consideration for the goods, was paid to the supplier by Account Payee Cheque. There is also no other alternative source of the procurement of raw materials shown by the Revenue, in which case, denial of credit was not justified. Appeal allowed in toto.

Summary

Issues:
1. Shortages of raw materials in stock leading to duty implications
2. Denial of cenvat credit based on invoices from a non-operational manufacturer

Analysis:
1. The case involved shortages of 1800 Kg of raw materials in the stock of a company manufacturing thermocol products, resulting in a duty implication of &8377; 28,032. The company attributed the shortage to staff negligence but reversed the credit to that extent. The Revenue initiated proceedings for denial of cenvat credit amounting to &8377; 2,24,556 based on invoices from a manufacturer not engaged in manufacturing activities for the past two years. The lower authorities passed an order leading to the present appeal.

2. Regarding the shortages issue, the Tribunal referred to a judgment by the Hon'ble High Court of Allahabad in Commr. Vs. Minakshi Castings, stating that shortages alone, without corroborative evidence, cannot establish clandestine removal. Therefore, the demand based solely on shortages was not upheld. On the denial of credit issue, the Tribunal noted that the invoices contained duty paying particulars, and payment was made to the supplier via Account Payee Cheque. The Tribunal cited precedents like Commr. of Central Excise & Customs, Kanpur Vs. Juhi Alloys Ltd. and decisions from the Hon'ble High Courts of Allahabad and Punjab & Haryana, emphasizing that the duty payment evidence in the invoices was sufficient. Consequently, the Tribunal set aside the duty confirmation and penalties imposed on the appellants.

In conclusion, the Tribunal set aside the impugned orders, allowing both appeals in full. The judgment was pronounced on 27/11/2017 by Mrs. Archana Wadhwa, Judicial Member of the Appellate Tribunal CESTAT ALLAHABAD.