2016 (3) TMI 479 - AT - Central Excise

Denial of Cenvat credit on capital goods - Held that - Following the ruling of Honourable Gujarat High Court and Bombay High Court in the cases of M/s Nish Fibres & M/s Maharashtra Electrosmelt Ltd. (2009 (12) TMI 415 - Gujarat HIGH COURT ) as the appellant have withdrawn the claim of the depreciation, which is an admitted fact, set aside the denial of Cenvat credit along with the penalty imposed under Rule 15 read with Section 11 AC of the Act. Reversal of Cenvat credit on the stock of raw materials found short - Held that - On perusal of record, find that the Panchanama is silent on the method of stock taking. It does not disclose the mode of physical verification. Under such circumstances, the contention of the appellant that the stock taking was done by way of eye estimation, is held tenable. Further find that the said objection have not been dealt with in the order-in-original or in the impugned order in appeal. Thus hold that the allegation of shortage of raw materials, does not stand. Thus, set aside the demand in respect to shortage of raw material along with penalty under Rule 15 read with section 11 AC on the appellant company as well as the penalty on the authorized signatory, Mr. Vipin Bajaj under Rule 26 of the Central Excise Rules. - Decided in favour of assessee

Summary

Issues:
1. Denial of Cenvat credit on capital goods.
2. Demand for reversal of Cenvat credit on short stock of raw materials.
3. Imposition of penalties on the company and authorized signatory.

Denial of Cenvat credit on capital goods:
The appellants, a manufacturing company and its authorized signatory, appealed against the denial of Cenvat credit on capital goods and the demand for reversal of credit on short stock of raw materials. The appellant contested the show-cause notice by stating that they had withdrawn the claim of depreciation under the Income Tax Act before the notice was issued. The Commissioner confirmed the demands and imposed penalties, citing retracted statements and lack of proper stock-taking methods. However, the Commissioner (Appeals) held that the denial of Cenvat credit on capital goods was valid but set aside the penalty on the shortage of raw materials due to lack of evidence of clandestine removal, except for the statement of the authorized signatory.

Demand for reversal of Cenvat credit on short stock of raw materials:
The appellant argued that the stock-taking method, based on eye estimation, was flawed, and objections were raised promptly. The Commissioner upheld the demands based on the retracted statement of the authorized signatory admitting to the shortage. However, the Tribunal found that the stock-taking method was not properly substantiated, and there was no evidence of clandestine removal. Relying on precedents and considering the lack of corroborative evidence, the Tribunal set aside the demand for the shortage of raw materials and the associated penalties.

Imposition of penalties on the company and authorized signatory:
The Tribunal noted that the appellant had withdrawn the claim of depreciation, leading to the denial of Cenvat credit on capital goods. As there was no evidence of clandestine removal regarding the shortage of raw materials, the penalties imposed on the company and the authorized signatory were set aside. The Tribunal emphasized the importance of tangible evidence to support allegations of clandestine activities and held that the demands and penalties were not justified in the absence of such evidence. Consequently, the appeal was allowed with consequential benefits.

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