2018 (1) TMI 1201 - AT - Central Excise

Clandestine removal - shortage/excesses of stock - Held that - there is no allegation that parts on which credit has been taken were removed from the factory. The shortage, if any, has occurred only in the accounting system - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing of cenvat credit on duty paid on inputs and service tax paid on input services.
- Provision of "consumption-Phy.Inv.Diff-Dire.Mati-others" in ledger for shortages/excesses.
- Shortage of invoice value during the financial year.
- Recovery of credit availed on the inputs found short.
- Imposition of penalty for the shortages noticed.
- Discrepancies in stock accounting system.
- Applicability of precedents in similar cases.

Analysis:

1. The case involved the appellants, manufacturers of motor vehicle seats, availing cenvat credit on duty paid on inputs and service tax paid on input services. The department discovered provisions in the appellants' ledger for shortages/excesses, leading to a shortage of invoice value during the financial year. A show cause notice was issued to recover the credit availed on the short inputs and impose penalties.

2. The appellant's counsel argued that the discrepancies in stock arose due to variations in the seats, use of deputy inputs, and accounting methods. They contended that the shortages were minimal and attributed them to differences in actual stock weight and accounting practices. Citing precedents like CCE Vs Maruti Suzuki India Ltd., the appellant argued that discrepancies without clandestine removal should not lead to credit disallowance.

3. The respondent reiterated the findings of the impugned order, emphasizing the accuracy of the SAP system in tracking inputs. They argued that the appellant failed to provide a satisfactory explanation for the shortages, justifying the demand raised.

4. The Tribunal noted that there was no evidence of physical removal of parts for which credit was claimed, indicating that any shortages occurred within the accounting system. Referring to a similar case where the Tribunal set aside the demand for shortages, the Tribunal found the demand in this case unsustainable. Citing the decision in the case of Maruti Suzuki India Ltd., the Tribunal allowed the appeal and set aside the impugned order.

5. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the demand and allowing the appeal with consequential relief as per law. The judgment highlighted the importance of considering accounting errors and lack of physical shortages in credit disallowance cases, aligning with established legal precedents.

This detailed analysis of the judgment provides insights into the issues raised, arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.