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2019 (6) TMI 555 - AT - Central ExciseCEVAT credit - inputs - shortages of certain inputs on which Credit had been availed - demand was for four years, i.e., from 2002-03 to 2005-2006 and the total Credit availed by the Appellant, is more than ₹ 2000/- crores - HELD THAT - During this period, the appellant was engaged in the manufacture of motor vehicles and in vehicle, approximately 50,000 inputs were used. The contention is that if the total shortage is taken into consideration, the same will come to 0.224%. It is also contended that some of the inputs were issued for the manufacture of final products and on the assembly line or at the shop floor, some were found defective or became defective during manufacturing process, and these are not taken into consideration. These parts/inputs were again issued from the Stores. In view of this, the demand is not sustainable and there is no evidence on record that the inputs on which the Credit was taken, were not received in the factory or removed as such from the factory. Hence, the demand is not sustainable. The demand is for four years and the total Credit availed by the Appellant, is more than ₹ 2000/- crores. Therefore, the shortage is negligible - appeal allowed - decided in favor of appellant.
Issues:
- Wrong availment of CENVAT Credit on inputs - Shortages of inputs as per Cost Audit Report - Theoretical shortages influenced by internal factors - Commissioner's findings on shortages - Nonreceipt of inputs by the Appellants - Usage of inputs in the manufacture of final products - Excise duty paid on inputs for CENVAT Credit - Statutory auditors' certification of stock control - Excesses in internal reports - Discrepancies in theoretical shortages - Applicability of previous decisions - Sustainability of the demand for four years - Negligible shortage in total Credit availed Analysis: 1. The case involved the confirmation of demand due to the wrong availment of CENVAT Credit on inputs, specifically based on shortages identified in the Cost Audit Report. The appellant argued that these shortages were theoretical and influenced by internal factors such as errors in conversion factors, discrepancies in Bills of Material (BOM), and usage of alternate parts. 2. The appellant contended that the Commissioner failed to substantiate that the shortages were inputs not actually procured and received. It was highlighted that the inputs in question, on which CENVAT Credit was availed, had excise duty paid and were used in the manufacture of final products, with excise duty reimbursed to the vendors. The appellant's total credit availed was substantial, with the shortage amounting to a very meagre percentage compared to total input consumption. 3. The appellant's argument was supported by the certification of stock control by statutory auditors, who accepted the meagre percentage of shortages in physical stock verification. Additionally, internal reports showed both shortages and excesses, with no adjustments made for the excesses, indicating theoretical discrepancies. 4. The appellant cited various decisions in support of their submissions, emphasizing that similar disputes had been resolved in favor of the appellant in previous cases, including one concerning the Pune unit that had attained finality at the Tribunal. 5. Upon review, the Tribunal found the demand unsustainable for the four-year period, considering the negligible shortage in relation to the total credit availed, which exceeded ?2000 crores. The Tribunal concluded that there was no evidence to support the claim that the inputs on which Credit was taken were not received in the factory or removed from the factory, leading to the setting aside of the impugned order and allowing the appeal.
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