9911796707
TMI Blog2006 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... f about bona fide nature of each such claim and that the assessee had not received proportionate amount for shortage recorded/adjusted in his favour - Rules 9 and 14 of Cenvat Credit Rules, 2004. [para 10] Cenvat/Modvat - Shortages of inputs subsequently made good with excess supply by supplier - After having settled account for shortages in a consignment covered by an invoice, adjustments against receipts without cover of excise invoices is not regular - Credit cannot be allowed - Rules 9 and 14 of Cenvat Credit Rules, 2004. [para 10] Cenvat/Modvat - Shortages of inputs - Inputs initially rejected but accepted later - Credit can be allowed if it is established that debit initially made against supplier is reversed by issue of Re-GRN, Commercial invoices, credit notes and corresponding adjustment in the ledger - Rules 9 and 14 of Cenvat Credit Rules, 2004. [para 10] Penalty - Cenvat/Modvat - Short receipt of inputs - Assessee availed ineligible credit, knowing fully well the legal prohibition against such availments, imposition of penalty along with demand of such credit and interest is in order - However, in view of fact that appellants received excess supply to make good the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns demand on account of the following categories of short receipts. (a) Short receipt due to weighbridge differences (weighbridge error) In cases where the GRN indicated short receipt ranging from 1 to 2% of the quantity ordered by the assessee and for which the assessee did not claim compensation from the supplier, the original authority decided that the shortage related to inputs that were not used in or in relation to the manufacture of final products. Therefore, the corresponding credit was not admissible. In cases of significant shortages falling in this category where the assessee had raised debit notes against the supplier also credit was dis-allowed. (b) Shortage on account of transcription error The assessee had claimed that semiliterate staff writing the GRNs had made errors especially in respect of loads comprising more than one type of material. In such cases the staff accounted only the quantity first ascertained after unloading one variety and omitted to record the details of second variety carried by the same truck thereby showing variety unloaded second as shortage in the GRN. As the GRN copies showing shortage ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the credit In cases where the assessee submitted copy of invoice for return or rejection of goods on payment of duty input credit taken initially was not denied. (f) Rejected items lying with the assessee In respect of inputs lying with the assessee initially rejected, credit was allowed. 3.In the impugned order the lower appellate authority upheld the order of the original authority in toto. He found that the contention of the appellants that the apparent shortage of inputs was 1 to 4%, and it was due to weighbridge difference as not factually correct. He observed that in addition to shortage on account of weighbridge readings, there had been genuine short receipt of inputs for which endorsements had been made in the commercial invoices, about raising of debit notes for quantity short received. Since the appellants themselves had raised debit notes they would be paying amount only for the quantities actually received and hence they would obviously not be entitled to take credit based on the duty amounts indicated in the invoices covering receipts. The appellant could not therefore attribute all shortages to weighbridge differences onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en removed and had been utilized in the factory, the appellants were eligible for credit. Moreover, as per para 3(iii) of CBEC Circular No. 645/36/2003-CX dated 16-7-2002, in case of inputs partially returned/reduced in the accounts but still capable of being used in the manufacture of finished goods, there was no need to recover the credit availed. They submitted that credit notes and debit notes were only adjustment of accounts and did not prove non-receipt or return of rejected material. As long as the material had been retained for utilizing in the factory, there was no question of paying duty or reversing the credit. As regards inputs returned after debiting credit and rejected items lying with the appellant, the original authority had allowed the benefit. II. Weight Shortage (i) Weighbridge Error Appellants claimed that there was a demand on account of weighbridge error for the entire period to the tune of Rs. 45,008/- in the order. This was on account of difference in weights owing to weighment in different scales. This credit was not demandable. In support of their claim they cited the following observations of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f against shortages. Relying on the Apex Court's decision in Philips India Ltd v. CCE, 1997 (91) E.L.T. 540, the appellants submitted that excise authorities should take into account legitimate business considerations of the manufacturers. It was not possible for the appellants to return the entire consignments merely because there was difference in weights (shortages). (iv) Rs. 76,701/- Debited by the Appellant The appellant claimed that against genuine shortage which had not been offset against excess supply, they had paid duty on the shortage to the extent of Rs. 76,701/-. This credit was not allowed by the lower authorities. Relying on the Tribunal's decision in TM Industries v. CCE - 1993 (68) E.L.T. 807, it was argued that charges based on private records were not sustainable unless the authenticity of such records was proved by the Revenue. 7.At the time of hearing, the ld. Counsel appearing for the appellants reiterated the various points made in the appeal filed. It was argued that an amount of Rs. 79,011/- forming part of the demand was on account of error in accounting. This could be established before the original authority if the matter was remanded. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a direction may be issued in the remand order to give benefit of Rs. 76,701/- paid by them for excess supplies and for inputs initially rejected but re-inducted in the main stream and not removed from the factory. If an opportunity was given, the appellants would establish that the rejected inputs were available in the factory. 9.Ld. SDR submits that he accepted the breakup of figures submitted by the ld. Counsel in the brief submitted. He stated that the impugned order was correct and in that it had upheld an order demanding duty credit availed on inputs not received in the factory and not used in the manufacture of final products. Shortages of goods covered by duty paying documents were made good by unauthorized supply of non duty paid goods. The appellants had not produced evidence for such receipts. The credit note No. RM/CR No. 2029 dated 31-12-99 showed that the appellants had credited an amount of Rs. 25,356/- to M/s. Singhi Metals, Bangalore for supply of 1597 kgs of material @ Rs. 18/- but did not avail excise duty due on the goods. This showed that the said quantity had not suffered excise duty. Similarly, even though the material covered by the invoice No. 4465 (Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the commercial expediency. It transpires from the records and submissions of the assessee that the shortages and excess supply are adjusted in a ledger in terms of value in respect of various suppliers. In the adjudication order, the original authority allowed the benefit in respect of shortages on account of rejects, which were returned on payment of duty under excise invoices. The corresponding credit initially allowed has not been disallowed. Whenever rejects are reinducted and the assessee issued credit note and Re-GRN and also credited supplier's account in the ledger benefit is allowed. The original authority has also allowed the benefit of credit in respect of inputs physically available with the assessee at the time of inspection by preventive staff. The appellant's prayer in the appeal is considered under different heads below : (a) Short receipt due to weighbridge differences As per the Order-in-Original, 1 to 2 % of the quantity ordered are received short in respect of certain consignments. These shortages are not claimed from the supplier. Variations due to weighbridge differences are normal. These need not reflect the actual shortage. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the bona fide nature of each such claim and that the assessee had not received proportionate amount for shortage recorded adjusted in his favour. (c) Genuine shortages subsequently made good with excess supply by the supplier During the material period, there were cases of admitted shortages for which the assessee claimed to have received excess supply. In all these cases the assessee had raised debit notes and endorsed details in the commercial invoices as per the Order-in-Original. The assessee claimed to have received material to offset shortages and met the liability towards credit of short receipts to the extent of Rs. 76,701/-. The original authority examined the credit note No. RM/CR 2029 dated 31-12-99 issued to M/s. Singhi Metals, Bangalore, to transfer the credit of Rs. 25,356/- indicating that excise duty due of Rs. 3,390/- on the said quantity had not been availed by the assessee. It was concluded by the original authority that in all such cases supplies had been made in an illegal manner and credit could not be allowed as claimed by the assessee for such receipts. After having settled the account for shortage in a consignment covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
