2015 (10) TMI 1789 - AT - Central Excise

Demand of differential Cenvat credit - shortage of raw material - Held that - adjudicating authority has confirmed the demand based upon the calculation of consumption of H.R. sheets for manufacturing of gas cylinders. - there is no allegation nor is there any finding of the adjudicating authority that the presumptuous calculation of the shortage of H.R. sheets, was removed from the factory premises of the appellant or there was clandestine manufacture and removal of finished goods i.e. gas cylinders. In our considered view, in the absence of any contrary evidence, confirmation of demand on presumptions and assumptions is incorrect and the impugned order is to be held as correct and legal. - impugned order does not suffer from any infirmity and does not call for any interference. - Decided against Revenue.

Summary

Issues involved:
Demand of differential Cenvat credit wrongly availed due to shortage of raw material (H.R. sheets).

Analysis:
The appeal addressed the issue of the demand of differential Cenvat credit wrongly availed by the respondent, based on the shortage of raw material, specifically H.R. sheets. The Department contended that the shortage of 177.289 MTs of H.R. sheets led to the improper availing of Cenvat credit. The first appellate authority was criticized for dropping the demand confirmed by the adjudicating authority, as the shortage was calculated based on the standard consumption of H.R. sheets for manufacturing gas cylinders. The adjudicating authority confirmed the demand, but the first appellate authority raised concerns regarding the evidence and calculation methods used to determine the shortage.

The first appellate authority highlighted that the alleged shortage was not verified through physical verification or other positive evidence but was based on average input/output ratios. The authority emphasized that calculations based on averages are not foolproof evidence, as slight variations in ratios could significantly impact the outcome. Additionally, the authority noted that the use of raw material in manufacturing capital goods was verifiable and should have been confirmed before alleging a shortage. The failure to verify the utilization of raw material for capital goods raised doubts about the validity of the shortage calculation based on input/output ratios.

The Tribunal found that there were no allegations or findings indicating clandestine removal of H.R. sheets or finished goods from the factory premises. Without concrete evidence to support presumptions and assumptions, the confirmation of the demand was deemed incorrect. The Tribunal concluded that the impugned order was legally sound and did not warrant any interference. Consequently, the impugned order was upheld, and the appeal was rejected.