2024 (11) TMI 1078 - AT - Central Excise

Denial of CENVAT Credit on the basis of shortages shown in the Cost and Audit Report - HELD THAT - Despite the fact that shortage of inputs was noticed and recorded in the Cost Audit Report, Appellant has attributed those shortages to different factors which were bound to happen when theoretical calculation was made without actual physical verification of stock, as there could be wrong entries of input, variation in weighment of input with that of rounded up figures available in the bills or that of wrong accounting but the ground taken for shortages including theft, if noticeable, would lead to different consequence. However, in the instant case, taking note of the percentage of shortages that was noticed for different financial years, when the procurement of material were too large the value of which runs in crores, such negligible shortages could be a natural consequence for which even protection is granted by the Hon'ble Supreme Court, as found in M/s. Maruti Udyog Limited case 2004 (6) TMI 155 - CESTAT, NEW DELHI that if shortages is very negligible and there is no allegation of clandestine removal or even no proof of excess clearance of final products or inputs as such, availment of credit by the manufacturer need not be interfered with. In Appellant s case except for FY 2009-10 percentage of shortages in rest of years, to which extended period was unnecessarily invoked, since in its preceding 3 years shortages were even much lesser than the shortages noted in M/s. Maruti Udyog Limited case (0.24%), denial of credit to the Appellant was improper - It is required to set aside the order passed by the Commissioner in due obedience to the judicial precedent set by the Hon'ble Supreme Court of India. The order passed by the Commissioner of Central Excise, Pune-I dated 30.10.2013 is hereby set aside - Appeal allowed.

Summary

Issues:
Legality of denying CENVAT Credit based on shortages in Cost Audit Report.

Analysis:
The appeal challenges the order denying CENVAT Credit of Rs. 2,93,39,629/- due to shortages in input accounts without evidence of use in manufacturing. The Appellant availed credit as per CENVAT Credit Rules, 2004. The Adjudicating Authority confirmed duty demand, interest, and penalty. The Appellant argued that shortages and excesses in their Register for different months offset each other, reducing the demand to Rs. 5,85,464/-. They claimed errors in booking transactions and cited precedents to show bona fide intent. They also challenged the Commissioner's order based on a stay order in a different case. The Appellant emphasized that the shortages were negligible and did not involve clandestine removal.

Analysis Continued:
The Respondent supported the Commissioner's order, citing shortages noted in the Appellant's own audit as the basis for confirming the demand. The Tribunal considered the submissions and noted that theoretical calculations without physical verification could lead to errors like wrong entries or accounting mistakes. They found the shortages to be negligible, especially considering the large procurement values, following the precedent set by the Supreme Court in M/s. Maruti Udyog Limited case. The Tribunal held that denial of credit was improper, as there were no allegations of clandestine activities or excess clearance of products. They set aside the Commissioner's order, aligning with the Supreme Court's judicial precedent.

Outcome:
The Tribunal allowed the appeal and set aside the Commissioner's order dated 30.10.2013, providing consequential relief, if any. The decision was pronounced in open court on 19.11.2024.