2016 (10) TMI 825 - HC - Central Excise

Discrepancies in stock - reversal of CENVAT credit - Substantial discrepancies in the valuation of inputs as per the stock register and the stock physically found - mere manufacturing loss or not - appeal against the judgement passed in the case M/s Shah Alloys Ltd. Versus The Commissioner C&CE, Ahmedabad III 2014 (11) TMI 116 - CESTAT AHMEDABAD - Held that - the assessee was consuming as many as 42 different inputs. The discrepancies in the stock was found only in five of them. As a whole, the shortfall is only 0.42% of the total consumption of inputs by the assessee. It was in this background that the Tribunal opined that such discrepancy can be put down as manufacturing loss - no reversal of CENVAT credit required - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against judgment of Customs, Excise & Service Tax Appellate Tribunal
- Whether shortfall of raw materials can be attributed to manufacturing loss within tolerance limit
- Whether Tribunal correctly considered industry knowledge for determining manufacturing loss tolerance limit

Analysis:
1. The Revenue filed an appeal challenging the Tribunal's judgment, raising questions regarding the attribution of raw material shortfall to manufacturing loss and the entitlement to Cenvat credit.
2. The Revenue argued that discrepancies in input valuation could not be considered as mere manufacturing loss.
3. The Tribunal's judgment highlighted that out of 42 different inputs, discrepancies were found in only five, amounting to a 0.42% shortfall in total input consumption, leading to the conclusion that the discrepancy could be categorized as manufacturing loss.
4. The High Court, after examining the facts, concluded that no question of law arose in this case. Consequently, the Tax Appeal was dismissed, upholding the Tribunal's decision based on the negligible shortfall in input consumption and industry knowledge regarding manufacturing loss tolerance limits.