2014 (12) TMI 622 - AT - Central Excise

Availment of ineligible Cenvat Credit - Shortage of physical stock - Imposition of equivalent penalty - Held that - In view of the decisions of the Hon ble Bombay High Court in the case of Greaves Cotton Ltd. 2007 (8) TMI 254 - HIGH COURT BOMBAY which is the jurisdictional High Court, we are duty bound to follow this decision. As per the decision, if there is a shortage of inputs and the assessee fails to account for utilization of inputs which were found short on which the credit was claimed, then the department was right in denying the Cenvat Credit on such inputs found short. However, the Hon ble High Court observed that the demand cannot be confirmed for the extended period as there cannot be any mis-statement on the part of the appellant in such cases as the shortage was with reference to stock recorded in the books of accounts. Following the ratio of this decision assessee directed to make pre deposit - Partial stay granted.

Summary

Issues:
- Duty demand confirmation on ineligible Cenvat Credit due to shortage of inputs during physical stock takings from 2008-2009 to 2012-2013
- Imposition of penalty on equivalent amount of the duty demand
- Allegation of suppression of facts by the appellant
- Applicability of decisions from previous Tribunal cases
- Contrary decision from the Hon'ble High Court of Bombay in a similar case

Analysis:

1. Duty Demand Confirmation and Penalty Imposition:
The appeal and stay petition were filed against the order confirming a duty demand of &8377; 2,93,39,629/- for ineligible Cenvat Credit on the shortage of inputs during physical stock takings from 2008-2009 to 2012-2013. The adjudicating authority also imposed an equivalent amount of penalty on the appellant. The appellant contended that the shortage was minimal at 0.11% and could be further reduced to approximately 0.008% if excesses were adjusted. The appellant argued that there was no evidence of goods being removed and cited previous Tribunal decisions to support their case.

2. Allegation of Suppression of Facts:
The appellant argued that the show-cause notice was issued only in April 2013 for the period from 2008-2009 onwards, based on figures from their own accounts. They claimed that there was no suppression of facts on their part, relying on Tribunal decisions that emphasized the insignificance of minor differences in input quantities during physical stock takings. The appellant sought a stay based on these arguments.

3. Applicability of Previous Tribunal Decisions:
The appellant relied on various Tribunal decisions, including Maruti Udyog Ltd. Vs. CCE, Hindustan Zinc Ltd. vs. CCE, BHEL Vs. CCE, Widia India Ltd. Vs. CCE, and Denso Kirloskar Industries Pvt. Ltd. vs. CCE, to support their contention that minor differences in input quantities should not lead to the denial of Cenvat Credit. These decisions highlighted the importance of considering the context and reasons behind such discrepancies during stock takings.

4. Contrary Decision from Hon'ble High Court of Bombay:
The Revenue cited a contrary decision from the Hon'ble High Court of Bombay in CCE, Aurangabad Vs. Greaves Cotton Ltd., where the confirmation of demand was upheld when shortages of inputs were noticed, and the assessee failed to account for the utilization of those inputs. The Revenue argued that the appellant should be held accountable based on this decision.

5. Final Decision and Pre-Deposit Requirement:
Considering the conflicting decisions, the Tribunal noted the jurisdictional High Court's ruling in Greaves Cotton Ltd. case. The Tribunal directed the appellant to make a pre-deposit of &8377; 65.00 lakhs (attributable to shortages within the normal period) within six weeks. Compliance with this pre-deposit would result in the waiver of the balance of dues, with recovery stayed during the appeal's pendency. This decision aligned with the High Court's stance on limitations and misstatements in cases of shortages based on recorded stock in the books of accounts.