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2024 (12) TMI 527 - AT - Central ExciseUndervaluation relating to stock transfer to their own unit - Undervaluation relating to sale to sister unit, M/s Aarem Chemicals Private Limited - Demand confirmed on short receipt of methanol and have taken cenvat cedit on quantity shown in the invoices - Denial of CENVAT Credit on the ground that this input has been used for manufacture of final product, hence do not qualify as input in terms of Rule 2 (k) of the Cenvat Credit Rules, 2004 - Demands sought to be confirmed by way of impugned order by disallowing the cenvat credit, which was taken on the basis of endorsed invoices/Xerox copies/endorsed bills of entry - Demand confirmed against the appellant on account of shortages of finished goods found during the course of physical stock verification - Revenue neutrality - Penalty on appellant. Undervaluation relating to stock transfer to their own unit - HELD THAT - The appellant is clearing the goods for sale to their sister unit and clearing a some part of the goods for captive consumption to their own unit for stock transfer. Therefore, the decision in the case of IOCL 2023 (5) TMI 436 - CESTAT KOLKATA is squarely applicable to the facts and circumstances of the case and the duty cannot be demanded in terms of Rule 8 of the Valuation Rules, accordingly, the demand of Rs.1,94,02,717/- is not sustainable. Moreover, it is a situation of revenue neutrality. Undervaluation relating to sale to sister unit, M/s Aarem Chemicals Private Limited - HELD THAT - The fact is further noted that the value of Formaldehyde and Melamine has been taken incorrectly by the Department as the cost prices which kept fluctuated and the Department took the balance sheet figures, which included miscellaneous overhead, but the Adjudicating Authority has taken the balance sheet figures, which does not represent appropriate value, the said figures are much lesser than the actual figures adopted by the appellant for some of the financial years in question and the Revenue has taken the higher figures shown in the balance sheet for whole of the period and there was a decrease in conversion cost for strong bond M-3 due to market forces as BIFR proceedings are going against the appellants. In that circumstances, the goods were sold on price justified by the Chartered Accountant on the basis of the records and the prices taken by the Adjudicating Authority without going any justification on higher figures found during the year, are not sustainable - The fact is also noted that whatever duty has been paid by the appellant, the same is available as cenvat credit to their sister unit. In that circumstances, it is a situation of revenue neutrality. Therefore, the demand is not sustainable as no malafide intention can be alleged against the appellant. Therefore, the demand of Rs.52,28,055/- is also not sustainable. Demand confirmed on short receipt of methanol and have taken cenvat cedit on quantity shown in the invoices - HELD THAT - The said issue has been examined by this Tribunal in the case of Hindustan Petroleum Corporation Limited 2015 (1) TMI 24 - CESTAT MUMBAI , wherein this Tribunal has held ' there may be variation in the transportation of the quantity of the goods accordingly, transit loss is allowable. Hence, I hold that the appellant is entitled for input credit as shown in the invoices. Accordingly, the impugned order is set aside and the appeal and stay application are allowed with consequential relief, if any.' - the demand confirmed in the impugned order amounting to Rs.1,15,616/- is also not sustainable and hence, set aside. Denial of CENVAT Credit on the ground that this input has been used for manufacture of final product, hence do not qualify as input in terms of Rule 2 (k) of the Cenvat Credit Rules, 2004 - HELD THAT - This input has been received by the appellant for research and development purposes in their factory itself. The research and development activity is also a part of the manufacturing activity, therefore, it cannot be said that the said input has not been used for manufacture of their final product as held by this Tribunal in the case of Sudarshan Chemicals Industries Limited 2010 (5) TMI 746 - CESTAT MUMBAI , wherein this Tribunal has observed ' the appellants are entitled for CENVAT credit availed on such inputs which went for testing and analysis to manufacture the final product. The CENVAT credit on capital goods used in R D section is also entitled as the same has been used in or in relation to the manufacture of the final product' - the Cenvat Credit of Rs.2,50,647/- cannot be denied to the appellant. Accordingly, the demand confirmed against the appellant is set aside. Demands of Rs.14,86,640/- and Rs.34,88,013/- sought to be confirmed by way of impugned order by disallowing the cenvat credit, which was taken on the basis of endorsed invoices/Xerox copies/endorsed bills of entry - HELD THAT - It is found that the appellant s sister unit, M/s Aarem Chemicals Private Limited has imported the goods and endorsed the bills of entry and issued invoices in favour of the appellant and the appellant has taken the cenvat credit thereon. The similar issue came up before the Hon ble Allahabad High Court in the case of Uni Cast Private Limited 2015 (10) TMI 375 - ALLAHABAD HIGH COURT , wherein the Hon ble High Court has observed ' The fact that the invoice did not indicate the name of the appellant was only a procedural lapse, which was rectified by the endorsement made by the manufacturer in favour of the applicant. Such endorsement made cannot make the document invalid and, consequently, we are of the opinion that endorsement made by the manufacturer in favour of the applicant on the bills raised by the supplier does not make the invoice invalid and the applicant is entitled to avail Modvat credit.' As it is not disputed by the Revenue that the appellant has not received the goods against the endorsed Bills of Entry/Xerox copies of the Bills of Entry/endorsed Invoices and the same has been used in the manufacture of final product and there is no allegation of diversion of the said goods pertaining in the above documents, the cenvat credit cannot be denied to the appellant, therefore, the appellant is entitled to take the cenvat credit of Rs.14,86,640/- and Rs.34,88,013/- on the basis of endorsed Bills of entry/endorsed invoices/Xerox copies of Bills of Entry. Demand confirmed against the appellant on account of shortages of finished goods found during the course of physical stock verification - HELD THAT - It is found that method of stock verification has been disputed by the appellant as stock verification, was not done physically, it was done on estimation basis by dip method and no Panchnama or weighment slips has been prepared to show the physical stock taking by the investigating team and in such a short span of time, stock verification of huge quantity is not possible. In that circumstances, the allegation of shortage of finished goods is not sustainable. It is also found that during the course of investigation, certain updation of books of accounts were also not considered as 158 MTs Formaldehyde is attributable to non-updation of books of accounts on the date of physical stock taking, as a result thereof, the quantity issued for captive consumption being 155 MTs could not be considered by the Department - the allegation of shortages of the finished goods is not sustainable in the absence of any corroborative evidence brought on record by the Revenue i.e. how much clearances were made and what is the method of transportation and what are the mode of the recipient of the goods - In that circumstances, the demand of Rs.14,04,491/- is not sustainable. Penalty on appellant - HELD THAT - As the demand of duty is not sustainable against the appellant, no penalty is imposable on the appellants. Appeal disposed off.
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