2018 (8) TMI 472 - AT - Central Excise

CENVAT Credit - shortage of inputs - Held that - The appellant had stored the cenvatable inputs out of their registered factory premises without the permission of jurisdictional authorities which is a technical lapse, but contended that the violation occurred owing to shortage of space - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Alleged discrepancy in stock of finished goods and Cenvat suffered input
- Imposition of central excise duty, interest, and penalty
- Appeal against adjudication order and rejection by Commissioner (Appeals)
- Storage of cenvatable inputs without permission
- Procedural violation under Central Excise Act and Rules

Analysis:
1. Alleged Discrepancy in Stock: The appellant, engaged in manufacturing industrial fans, faced a Show Cause Notice alleging discrepancies in finished goods stock and Cenvat suffered input. The adjudicating authority confirmed a demand for central excise duty, interest, and penalties. The Commissioner (Appeals) upheld this decision, leading to the appellant's appeal before the Tribunal.

2. Appellant's Submissions: The appellant's counsel argued that there was no shortage of finished goods or cenvatable inputs as claimed in the notice. They explained that certain items were stored in a different workshop due to space constraints, with permission sought later. The counsel emphasized that this was a technical lapse and not a deliberate violation of Central Excise Law.

3. Infrastructure and Goods Transfer: The appellant's turnover was below 1.5 crores, and they lacked sufficient infrastructure. Finished goods were recorded in their accounts, transferred to another factory, and not sold to customers. Inputs were documented in their accounts but physically stored at a different location for assembly, eventually cleared under Central Excise Invoices.

4. Procedural Violation and Penalty: The counsel acknowledged a procedural violation but argued that penalties should align with Rule 27 of the Central Excise Rules, 2002, instead of the higher penalties imposed. The Departmental Representative supported the lower authorities' orders.

5. Tribunal's Decision: The Tribunal acknowledged the technical lapse of storing inputs without permission due to space constraints. The demand for central excise duty and associated penalties were set aside, concluding that the penalties imposed under Section 11AC were unwarranted. Consequently, the appeal was allowed, favoring the appellant.

In summary, the Tribunal ruled in favor of the appellant, setting aside the demands and penalties related to the alleged discrepancies in stock and storage of cenvatable inputs without permission, citing technical lapses and lack of deliberate violation as key factors in their decision.