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2021 (11) TMI 830 - AT - Central ExciseCENVAT Credit - variance in the inventory of the Cenvat inputs maintained by the appellants - value of net shortages in the input inventory - HELD THAT - The shortages and excesses if any found are theoretical due to huge quantity of inputs handling. It is not a case of the Department that the appellant have ever removed any Cenvat inputs without payment of duty from their factory. Therefore, even though there is any shortage or excess, the input was available within the factory premises or consumed in the production. It can be seen that the same facts and circumstances existing in the present case, even though there is some theoretical variation in the inputs was found and on that ground the CENVAT Credit cannot be denied. The CENVAT Credit cannot be denied to the appellant on a theoretical variance in the inputs - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Variance in inventory of CENVAT inputs. 2. Theoretical shortages and excesses in inputs. 3. Application of Rule 3(5B) of CENVAT Credit Rules, 2004. 4. Allegations of wrongful availment and utilization of CENVAT credit. 5. Invocation of extended period for demand. 6. Previous judgments on similar issues. Detailed Analysis: 1. Variance in Inventory of CENVAT Inputs: The appellants were availing CENVAT Credit on inputs, capital goods, and service tax paid on input services. During scrutiny, a variance in the inventory of CENVAT inputs was observed, resulting in net shortages valued at ?1,18,95,547/- and corresponding CENVAT credit of ?12,25,242/-. A show-cause notice was issued, and the Additional Commissioner confirmed the recovery of inadmissible credit, interest, and penalty. The Commissioner (Appeals) upheld this order, leading to the present appeal. 2. Theoretical Shortages and Excesses in Inputs: The appellants argued that the discrepancies were due to their sophisticated computer-based accounting system and large magnitude of operations, which could lead to minor errors such as picking wrong parts, incorrect postings, and parts being found in different storage racks. They contended that these shortages were theoretical and negligible (0.58%) compared to the total value of inputs. They also cited previous judgments in their favor, where similar issues were resolved. 3. Application of Rule 3(5B) of CENVAT Credit Rules, 2004: The Revenue argued that Rule 3(5B) required payment equivalent to the CENVAT credit taken on inputs written off. However, the Tribunal clarified that this rule applies only when goods are available in the factory and a book entry is made to write off their value, which was not the case here. The inputs were either available within the factory or consumed in production. 4. Allegations of Wrongful Availment and Utilization of CENVAT Credit: The Tribunal found no evidence of clandestine removal or wrongful utilization of inputs. The discrepancies were minor and within commercial tolerance limits. The appellants maintained proper documentation and accounted for all inputs upon receipt. 5. Invocation of Extended Period for Demand: The Tribunal noted that mere allegations of suppression or intent to wrongfully avail credit were insufficient without substantive evidence. The extended period for demand was not justified in this case. 6. Previous Judgments on Similar Issues: The Tribunal referred to several previous judgments, including those involving the same appellant (Tata Motors Ltd.), where similar discrepancies were deemed negligible and not indicative of any wrongdoing. These judgments emphasized that minor variations in large-scale operations are commercially acceptable and should not lead to denial of CENVAT credit. Conclusion: The Tribunal concluded that the shortages and excesses were theoretical and due to the large volume of inputs handled by the appellants. There was no evidence of clandestine removal or wrongful utilization of inputs. Rule 3(5B) was not applicable as the goods were either available in the factory or consumed. The appeal was allowed, and the impugned order was set aside, granting consequential relief to the appellants.
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