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TMI Blog2018 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, Chennai demanding a sum of Rs. 31,30,637/-, Rs. 5,94,724/-, Rs. 2,74,481/- respectively being the MODVAT/CENVAT credit taken on inputs, which were not used in the manufacture of final products, during the periods from January 2000 to March 2004, April 2004 to January 2005 and March 2009 respectively. The appellant sent replies to the said Show Cause Notices stating that the the shortage was due to heat, evaporation and differences in measurement methodologies. After considering the reply of the appellant, the jurisdictional Commissioner and the Commissioner (Appeals), passed orders confirming the demand made in the Show Cause Notices, with applicable rate of interest and also imposing penalty. Aggrieved against the same, the appellant is before this Court with the present Appeals. 3. Heard the learned counsel for the appellant and the learned counsel for the respondent. Perused the materials available on record. 4. Perusal of records would show that the appellant is engaged in manufacture of additives for lubricating oil classifiable under Chapter 38 of the Central Excise Tariff Act, 1985. The appellant availed CENVAT credit in respect of excise duty paid on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be a physical change, through thickening, based on the temperature level. The appellant further submitted that it is not possible for them to use the raw materials as such, and the tanks are equipped with heating facility and a temperature gauge, to monitor and measure the temperature. After heating the tank, they draw the material and the quantity drawn for consumption is measured by mass-flow meter, before using in production. Since only weighbridge was used at the time of receipt, and a different measurement device viz. mass flow meter was used for flowing liquids, a reconciliation was done, at the end of every month. The appellant also contended that Cenvat Credit Rules do not provide for reversal of credit, based on the difference in measurement methodologies. 6. It is contended by the appellant before the authorities that shortage was inevitable due to the nature of inputs, the process involved in the manufacture, when huge volume of materials handed. Before the authorities below, to substantiate their claim, the appellant has cited various decisions of the Tribunal viz., P.K.P.N.Spinning Mills Vs. Collector of Central Excise, Coimbatore reported in (1997) 89 ELT 568 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nov Dec Jan Feb Mar Physical Stock 117.808 108.185 189.766 56.626 56.626 206.086 284.466 193.000 55.161 79.690 120.964 0.000 Book Stock 117.808 108.185 191.844 59.470 56.626 206.086 284.466 193.000 50.161 79.690 120.964 0.000 Variation 0.000 0.000 -2.078 -2.844 0.000 0.000 0.000 0.000 5.000 0.000 0.000 0.000 B.OLOA 200 Physical Stock 70.226 137.999 195.745 71.863 170.632 146.261 177.863 77.962 119.607 222.767 182.925 145.158 Book Stock 70.226 137.999 195.745 76.389 170.632 146.261 177.863 77.962 121.498 235.425 182.925 146.433 Variation 0.000 0.000 0.000 -4.526 0.000 0.000 0.000 0.000 -1.891 -12.658 0.000 -1.275 B.OLOA 262 Physical Stock 193.913 151.349 101.482 49.526 96.932 92.555 35.684 21.627 56.165 106.120 58.042 39.141 Book Stock 193.913 151.349 101.482 49.526 97.507 92.555 35.774 23.827 55.663 104.442 58.042 39.274 Variation 0.000 0.000 0.000 0.000 -0.575 0.000 -0.090 -2.200 0.502 1678 0.000 -0.133 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '01 10.453 7 Feb '01 5.282 13. In the above said circumstances, the Commissioner held that the argument of the appellant that shortages were due to calibration errors, parallax errors, difference in weighment methodology, etc., have been advanced, to cover up the shortages. Therefore, the Commissioner rejected the reasons given by the appellant for the shortage of inputs and held that the shortages shown in the monthly stock taking report as the actual shortages, have not been used in the manufacture of final products. 14. Finally, the Commissioner by his common Order-in-Original Nos.4 & 5 dated 30.01.2006 has given a finding that the appellant had suppressed the facts, in order to retain the credit involved on the said shortages with an intention to evade payment of duty and therefore, the extended time limit, as provided under the erstwhile Rules 57 I and 57 AH of Central Excise Rules, 1944 and Rule 12 of Cenvat Credit Rules 2001/2002 read with proviso to Section 11A(1) of Central Excise Act, 1944, is invokable for demand of credit of duty, taken on the shortages of inputs covered under the Show Cause Notices dated 01.02.2005 and 06.05.2005; and held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by its common order dated 13.02.2015 passed final order No.40149 - 40152/2015, dismissed the above appeals E/141/2006, E/337/2006, E/381/2006 and E/41246/2013 and upheld the orders, disallowing credit in respect of all the four appeals and also upheld the order imposing equivalent penalty, under Section 11AC in respect of Appeals E/381/2006 and E/337/2006. However, the Appellate Tribunal set aside the penalty imposed, in respect of Appeals arising from E/141/2006, E/381/2006 and E/337/2016. Aggrieved against the common order passed by the Appellate Tribunal, Appeals in CMA.Nos.1122 to 1125 of 2017 have been filed before this Court. 18. Perusal of material on record would further go to show that the demand made by the authorities was for the reason that the inputs were not utilized fully, in the manufacturing process and the percentage of loss was, from 5.56 to 5.58%. It is also clear from the records that the appellant themselves have recorded such shortage of input, after the receipt of the inputs to their factory. While determining the shortage, it is clear from the records that the inputs found short, were not consumed, in the manufacturing process. When the inputs were not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the material on record that not even a single variation is recorded in the stock, for more than 70% of the period, whereas, for particular inputs, there is a huge shortage for a specified period i.e., from April 2001 to March 2002, which is reproduced hereunder:- "A. GLISSOPAL 1000 (Poly Iso Butene) April May June July Aug Sept Oct Nov Dec Jan Feb Mar Physica l Stock 117.808 108.185 189.7661 56.626 56.626 206.086 284.466 193.000 55.161 79.690 120.964 0.00 Book Stock 117.808 108.185 191.844 59.470 56.626 206.086 284.466 193.00 50.161 79.690 120.964 0.00 Variation 0.000 0.000 -2.078 -2.844 0.000 0.000 0.000 0.000 5.000 0.000 0.000 0.000 B.OLOA 200 April May June July Aug Sept Oct Nov Dec Jan Feb Mar Physica l 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 56.625 206.086 284.466 193.000 121.498 235.425 182.925 146.433 Variation 0.000 0.000 0.000 -4.526 0.000 0.000 0.000 0.000 -1.894 -12.658 0.000 -1.275 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 all 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 or weighment on different scales at the dispatch and receiving ends and whether the same is within the tolerance limits with reference to the Standards of Weights and Measures Act, 1976. (v) Whether the recipient assessee has claimed compensation for the shortage of goods either from the supplier or from the transporter or the insurer of the cargo. 13. All these factors listed above and any other relevant factor has to be kept in view in deciding any particular case as to whether the entire consignment has been received at the end of the recipient assessee without any diversion. Tolerances in respect of hygroscopic, volatile and such other cargo has also to be allowed as per industry norms excluding, however, unreasonable and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take credit for the entire quantity and value of input that had actually produced fabric that was lying in store. In the said decision, it is held that since the Department had not disputed the loss to the extent of 5% of total quantity of finished product, the assessee therein was entitled to Cenvat Credit on total quantity and value of inputs that went into making of fabric. The relevant portions are as follows:- 12. Keeping the above in mind, if we get back to the scope of Rule 9A, it is seen that there are three expressions used. They are 6 (i) inputs of such finished product (ii) lying in stock or in process and (iii) contained in finished product. 13. To say that what is contained in finished product is only a quantity of all the inputs of the same weight as that of the finished product would presuppose that all manufacturing processes would never have an inherent loss in the process of manufacture. The expression 'inputs of such finished product' contained in finished products' cannot be looked at theoretically with its semantics. It has to be understood in the context of what a manufacturing process is. If there is no dispute about the fact that every manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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