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2018 (12) TMI 1529 - AT - Central ExciseCENVAT Credit - shortage recorded on the basis of stock taking - whether the cenvat credit in respect of shortage recorded on the basis of stock taking done by the appellant themselves in their factory is required to be reversed or otherwise? - Held that - The same issue in the appellant s own case COMMISSIONER OF CENTRAL EXCISE, CUS. & S. TAX, RAIGAD VERSUS M/S. CASTROL INDIA LTD 2018 (3) TMI 763 - CESTAT MUMBAI has been decided by this Tribunal whereby the demand raised on such theoretical shortage was set aside. The impugned order is not sustainable - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the CENVAT credit in respect of shortage recorded on the basis of stock-taking done by the appellant themselves in their factory is required to be reversed. Issue-wise Detailed Analysis: 1. Whether the CENVAT credit in respect of shortage recorded on the basis of stock-taking done by the appellant themselves in their factory is required to be reversed: The appellant argued that the process of stock-taking and recording shortages in financial accounts is carried out regularly and is communicated to the department for their factories located in different places. They cited a previous decision by the Mumbai Tribunal (Order No. A/85327/2018 dated 22.02.2018) in a similar case where the demand raised by the department was set aside. The appellant maintained that the shortages were due to reconciliation of accounts and discrepancies detected during quarterly stock checks, which were periodically informed to the department. They emphasized that there was no evidence of clandestine removal of raw materials, and hence, no duty could be demanded on unreconciled stocks. The Revenue reiterated the findings of the impugned order, insisting that the shortages warranted reversal of CENVAT credit. Upon careful consideration, the Tribunal referred to the Mumbai Tribunal's order, which found that the shortages were due to accounting discrepancies and not due to any clandestine removal. The Tribunal highlighted that the shortages were minuscule and within commercially acceptable limits. It was noted that the appellant had a sophisticated computer-based accounting system, and the shortages detected during physical verification were not indicative of any improper disposal of inputs. The Tribunal emphasized that the presence of unaccounted excess inputs further supported the argument that the shortages were due to accounting errors. The Tribunal also referred to a similar case involving Maruti Udyog Ltd. (2004 (173) ELT 382 (Tri.)), where it was held that minor discrepancies in stock-taking were acceptable and did not justify the disallowance of credit. The Tribunal concluded that the demand for reversal of CENVAT credit was not sustainable as there was no evidence of improper disposal or clandestine removal of inputs. In light of the above, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with the law. The operative portion of the order was pronounced in open court. Conclusion: The Tribunal ruled that the demand for reversal of CENVAT credit based on theoretical shortages detected during stock-taking was not sustainable. The shortages were attributed to accounting discrepancies, and there was no evidence of clandestine removal or improper disposal of inputs. The appeal was allowed, and the impugned order was set aside.
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