2018 (10) TMI 690 - AT - Central Excise

CENVAT Credit - excess availment of credit - liquid gases - procurement of inputs less than the invoiced quantity but availed full CENVAT Credit of duty indicated in the respective invoices - loss due to evaporation - Rule 3 of the CCR, 2004. Held that - Admittedly, the extent of loss having not been addressed in the statute, the same has been allowed by various courts considering the nature of goods involved - such loss cannot be ruled out and the assessee-appellant herein should also get the benefit of the same. But, at the same time, the argument of appellant that the losses of the kind involved in the present case are normal and the counter-argument of the Revenue that such loss is high, has not been proved with any supporting scientific evidences. This assumes importance when there is no allegation of diversion or man-made loss. For this reason, the matter requires a fresh adjudication, requiring the supporting documents as indicated above to be placed on record. Appeal allowed by way of remand.

Issues:
1. Eligibility of CENVAT Credit for unutilized inputs.
2. Alleged shortage of liquid gases and CENVAT Credit availed.
3. Applicability of previous court decisions in similar circumstances.
4. Reversal of CENVAT Credit and timing of the action.
5. Assessment of loss due to evaporation and handling of volatile goods.
6. Lack of supporting scientific evidence in determining losses.
7. Decision to remand the matter for fresh adjudication.

Eligibility of CENVAT Credit for unutilized inputs:
The case involved the appellant availing CENVAT Credit on inputs not received for the manufacture of final products, leading to a Show Cause Notice alleging violation of Rule 3 of the CENVAT Credit Rules, 2004. The issue was whether the unutilized inputs were eligible for CENVAT Credit.

Alleged shortage of liquid gases and CENVAT Credit availed:
The appellant procured liquid gases for manufacturing processes, facing allegations of availing full CENVAT Credit despite reported shortages. The dispute centered on the abnormal percentage of loss/shortage in the received liquid gases and the eligibility of the appellant for the availed CENVAT Credit.

Applicability of previous court decisions in similar circumstances:
The appellant cited previous court decisions where similar losses were considered normal and allowed for CENVAT Credit benefits. The argument emphasized the nature of the goods, handling procedures, and the absence of diversion or intentional loss.

Reversal of CENVAT Credit and timing of the action:
The reversal of a portion of CENVAT Credit by the appellant before the first appeal raised questions about the bona fide nature of the action. The timing of the reversal in relation to the proceedings and the Order-in-Original was a point of contention.

Assessment of loss due to evaporation and handling of volatile goods:
The volatile nature of the liquid gases, handling requirements, and the impact of temperature and atmospheric conditions on the volume of the gases were crucial factors. The appellant argued that loss due to evaporation was inherent in the nature of the goods and part of normal business operations.

Lack of supporting scientific evidence in determining losses:
The Tribunal highlighted the absence of scientific evidence supporting the extent of reported losses and the conflicting arguments regarding the normalcy or excessiveness of the losses. The need for scientific documentation to substantiate the loss claims was emphasized for a fair adjudication.

Decision to remand the matter for fresh adjudication:
Considering the lack of conclusive evidence and the need for a detailed examination of the loss factors, the Tribunal set aside the impugned Order and remanded the case for a fresh adjudication. The adjudicating authority was directed to gather necessary documentary and scientific evidence for a rational conclusion.

← Previous Next →