2016 (12) TMI 1229 - AT - Central Excise

Demand - Reversal of Cenvat credit - Shortage of stock - Penalty - Held that - stock verification was not done properly can only be considered as an after-thought and is rejected. Appellant has therefore, correctly paid duty with respect to shortages found and are correctly liable to penalty. So far as reversal of Cenvat Credit on goods cleared as such is concerned, the Appellant is of the view that inputs were in the form of rods and after receipt some of the inputs were found to be defective - To a specific query from the Bench whether any processes were carried on the inputs before selling them as waste and scrap, ld.Consultant appearing for the Appellant could not bring any evidence on record to suggest that any process was done on the inputs before the same were sold - The argument of the Appellant that inputs on receipt were found defective and were cleared as waste and scrap is not tenable because even if the defective inputs are sold as scrap then also the actual Cenvat Crdit taken at the time of receipt of these inputs was required to be reversed - Appeal dismissed - decided against the assessee.

Summary

Issues:
1. Correct payment of duty on shortages detected by Central Excise officers
2. Reversal of Cenvat Credit on goods cleared as scrap
3. Imposition of penalties on the Appellant

Analysis:

Issue 1: Correct payment of duty on shortages detected by Central Excise officers
The Appellant argued that shortages in inputs and scrap were due to improper stock-taking and should not be upheld. However, the Authorized Representative of the Appellant had admitted the shortages, and it was found that the Appellant correctly paid duty on the shortages detected during joint verification. The claim of improper stock-taking was considered an afterthought and rejected. Therefore, the Appellant was held liable for the shortages and penalties.

Issue 2: Reversal of Cenvat Credit on goods cleared as scrap
The Appellant contended that the inputs cleared as scrap were defective and sold as waste, not as inputs. However, the rules stipulate that when inputs are cleared as such, the Cenvat Credit taken must be reversed. The Appellant failed to provide evidence of any processing done on the inputs before selling them as scrap. Additionally, it was revealed that the job-work challans issued were only for documentation purposes, and the scrap was never actually sent for job-work. The conduct of the Appellant was deemed mischievous, and penalties were imposed correctly.

Issue 3: Imposition of penalties on the Appellant
The Adjudicating Authority had imposed penalties on the Appellant, which were upheld by the First Appellate Authority. The penalties were deemed appropriate due to the deliberate attempt to clear inputs without reversing Cenvat Credit and the misrepresentation in the job-work transactions. As a result, the Appeal filed by the Appellant was dismissed, and the order of the First Appellate Authority was upheld.

In conclusion, the judgment affirmed the correct payment of duty on shortages, the requirement to reverse Cenvat Credit on goods cleared as scrap, and the imposition of penalties on the Appellant for the deliberate actions taken.