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TMI Blog2015 (7) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... rtage cannot be attributed to the difference in measurement because of heating of liquids, or evaporation loss, or remnant of inputs in pipelines as claimed by the appellants. As rightly held by the adjudicating authority, the inputs are having high viscosity and not volatile in nature. Considering the fact that the shortage of inputs accounted only for specific months and not in a continuous manner it is established that the shortage of inputs is not on account mere difference in variation of weigment methodology and the said quantity of inputs have not been used in the manufacture of final products after receipt of the inputs in appellant's factory. Further, it is evident that it is not the case that the shortage is of very meager or negligible quantity. - loss is not due to evaporation or process loss and also the percentage of shortage is more than 5.56%. Therefore, case laws relied upon by the appellants clearly distinguished and the same are not applicable to the facts of the present case. Appellants are failed to put forth any justifiable reason that the shortage is purely due to the difference in actual weighment and the massflow meter as there is no uniformity. Whereas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal No. E/337/2006 and E/381/2006 are as under: The appellants are engaged in the manufacture of additives for lubricating oil classifiable under Ch. 3811 of the Central Excise Tariff Act, 1985. They availed credit on inputs under erstwhile modvat scheme as well as under the cenvat credit Rules. The inputs are received in tankers as well as in packaged condition in drums and barrels. During verification by the department officials it was found that they carryout stock taking of the inputs on monthly basis at the end of the month the quantity of the inputs found to be short, were subsequently adjusted in their records as consumption. The appellants had not reversed the credit on the shortages of the inputs. Show cause notices dated 01.02.2005 and 06.05.2005 were issued demanding ₹ 37,25,361/- under Rule 57I and 57AH of Central Excise Rules, 1944 read with Rule 12/14 of Cenvat Credit Rules, 2004. The adjudicating authority in the impugned order confirmed the demand and imposed equivalent penalty of ₹ 31,30,637/- under Rule 57(I) (4) and 57 AH (2) of the Central Excise Rules and Rule 13 of Cenvat Credit Rules read with Section 11 AC of the Central Excise Act, 1944. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory, results in evaporation loss. Both in the storage tanks as well as in the pipelines and also remnant lies in the pipelines results in shortage. He submits that the maximum loss is approximately 5.58% and by taking into account the nature of inputs and the nature of manufacture, the entire quantities are used in the production. This loss is within the factory of production and not in transit mostly due to leverage of measurement and secondly by dip measurement and thirdly by heating of the liquid. The minimum loss is permissible and they are not required to reverse the credit on the shortage. 6. In respect of solid inputs, the Ld. Advocate submits that these inputs are received in packaged conditions in drums or in barrels, which has to be cut open to remove the inputs thus results clinkage loss . He relied upon the following case laws in support of his contention. 1. UOI Vs. Hindustan Zinc Ltd 2013 (294) ELT 378 2. Hindustan Zinc Ltd. Vs. CCE, Visak 2004 (172) ELT 244 3. Denso Kirloskar Indus. Pvt. Ltd. Vs. CCE, Bangalore 2006 (195) ELT 102 4. BHEL Vs. CCE, Chennai-III 2008 (223) ELT 260 5. Asco (India) Ltd. Vs. CCE, Chennai 2007 (213) ELT 553 6. Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) ELT 218 (Tri. -LB) 3. Nalco Vs. CCE, Bhubaneswar 2003 (159) ELT 370 (Tri.-Kol.) 4. Asco (India) Ltd. Vs. CEGAT, Chennai 2009 (238) ELT 397 (Mad.) 5. Pre-stressed Udyog (I) Pvt. Ltd. Vs. CCE, Ranchi 2012 (284) ELT 12 (Jhar.) 6. Philips Carbon Black Ltd. Vs. CCE, Bolpur 2012 (277) ELT 347 (Tri.-Kol.) 8. I have carefully considered the submission by both sides and perused the records. Prima facie the issue in this case relates to shortage of inputs not used in the manufacture of the final products and demand on reversal of cenvat credit on the shortage of inputs and imposition of penalty and invocation of extended period. The appellants are manufacturers of additives for lubricating oil. The main inputs are organic compounds ie., poly isobutene, alkyd phenol and amines. Out of the total inputs, the inputs Glissipal 1000, OLOA 200 and OLOA 262, on which major shortage noticed constitutes the extent of 54% of the total credit availed on the inputs. On perusal of records, I find that there is no dispute on the fact that the appellants have received the entire quantity of inputs and accounted in their stock as per the weighment recorded at the time of receipt in their fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.000 0.000 0.000 0.000 B.OLOA 200 April May June July Aug Sept Oct. Nov. Dec Jan Feb Mar Phy. stock 70.226 137.999 195.745 71.863 170.632 146.261 177.863 77.9620 119.607 222.767 182.925 145.158 Book stock 70.226 137.999 195.745 76.389 56.626 206.086 284.466 193.000 121.498 235.425 182.925 146.433 Variation 0.000 0.000 0.000 -4.526 0.000 0.000 0.000 0.000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apr.'03 3.807 6 Nov.'04 3.400 GLISSOPAL 1000 (in MT) Sl. No. Month Shortage 1 Feb.'00 5.238 2 Apr.'00 3.304 3 May'00 13.510 4 Jul'00 6.031 5 Oct.'00 6.061 6 Jan.'01 10.453 7 Feb.'01 5.282 9. I find that the input OLOA 200 , the highest shortage of 12.65 MTs noticed in the month of Jan.'02 and 5.244 MTs in the month of March'00. Similarly, in the case of Glissopal 1000 , the highest shortage of 13.510 MTs was noticed in the month of May'2000 and 10.453 MTs in the month of Jan.'01. The above shortages indicates that there is no uniformity in the shortage of inputs and it is evident that this shortag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the said decision is reproduced below:- 12. Considering arguments from both sides and the case laws cited by both sides which have been extracted above, we are of the considered view that different types of shortages cannot be dealt with according to any one inflexible and fixed standard for the purpose of allowing credit under Rule 3 (1) of the Cenvat Credit Rules. Decision to allow or not to allow credit in any particular case will depend on various factors such as the following:- (i) Whether the inputs/capital goods have been diverted en-route or the entire quantity with the packing intact has been received and put to the intended use at the recipient factory. (ii) Whether the impugned goods are hygroscopic in nature or are amenable to transit loss by way of evaporation etc. (iii) Whether the impugned goods comprise countable number of pieces or packages and whether al such packages and pieces have been received and accounted for at the receiving end. (iv) Whether the difference in weight in any particular case is on account of weighment on different scales at the dispatch and receiving ends and whether the same is within the tolerance limits with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on those shortages after adjusting the excess quantity during the course of stock taking by way of dip method. The case law relied upon by the ld. Advocate for the appellants are not similar to the facts of this case. In this case, the shortages were written off by the assessee in their books of account. In this case, the appellants themselves have admitted the shortages. Therefore, the case laws relied upon by the ld. Advocate are not relevant to the instant case 14. The above Tribunal's decision squarely applicable to the facts and circumstances of the present case. As discussed in detail in the preceding paragraphs, the appellants are failed to put forth any justifiable reason that the shortage is purely due to the difference in actual weighment and the massflow meter as there is no uniformity. Whereas, in the present case very high abnormal shortage of inputs ranging from 3.0 Tons to 12.658 Tons, in respect of OLOA 200 and in the case of Glissopal 1000, from 3.3 Tons to 13.51 Tons cannot be treated as process loss or evaporation or calibration or weighment loss. Therefore, the appellants are not eligible for the modvat/cenvat credit on the quantity of inputs whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that shortage found in stock cannot be blindly treated as loss in transit and there are proper procedures and guidelines prescribed for claiming the benefit on such kind of losses and the magnitude of the shortage detected ie. 22293 of cement bags is astounding and to claim in one stroke that it is all transit loss is incredible. This is a finding of fact. The appellant claimed the benefit of transit loss of 22293 cement bags and even if, it is in weight a petty quantity as compared to total cement received by the appellant, then also it cannot be said to be insignificant quantity of cement bags for the appellant and small quantity for the revenue. The Hon'ble High Court decision squarely applicable to the present case therefore penalty imposed under Section 11AC is liable to be upheld. In so far as the penalty imposed under Rule 13 15 of CCR is concerned looking into the facts and circumstances of the case and having regard to the facts that 11AC penalty already imposed, I take a lenient view. a) In view of the forgoing discussions I uphold the orders on disallowance of credit in respect of all the four appeals. b) I uphold the order imposing equivalent penalty und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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