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2016 (7) TMI 297 - CESTAT CHENNAI

2016 (7) TMI 297 - CESTAT CHENNAI - 2016 (341) E.L.T. 299 (Tri. - Chennai) - Demand of duty on loss of inputs on the ground that excessive loss of excisable goods arising in the course of repacking, warrants recovery the proportionate input credit and that is recoverable. - assessee purchased scouring power and detergent powder manufactured by its sister concern for repacking in different denomination packs as well as cleared. - Held that:- Revenue’s primary allegation is that because there .....

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evidence to show that the goods came from the sister concern of the appellant has gone elsewhere without suffering duty on MRP basis, the appellant should not suffer any arbitrary percentage of disallowance of CENVAT credit apparent from show cause notice - Mere statistical figure shall not serve purpose by any scientific calculation. The calculation should demonstrate that there was breach of law supported by evidence. That is not the present case. Added to this, without any evidence on re .....

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provisions of the Central Excise Law, it has been recognized as a manufacturer under section 2(f)(iii) of the Central Excise Act, 1944. During the periods 2007-08 to 2011-12 it had purchased scouring power and detergent powder manufactured by its sister concern for repacking in different denomination packs as well as cleared. The goods so cleared are subject to Central excise duty under MRP scheme under section 4A of the Central Excise Act, 1944. 2. Revenue alleged that both the goods having bee .....

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d to occur. Further, due to old age of the machines used for repacking, loss is also bound to occur. There was a tolerable extent of loss faced by appellant. Revenue noticed that both the commodities have shown their behavior in the following manner as to the loss incurred:- An analysis of the shortage of raw materials over the period of 5 years indicated a pattern that is not justifiable by any standard. The loss of duty availed inputs in percentage terms for the period from 2007 - 08 to 2011 - .....

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in repacking which was to the extent as mentioned in page 77 of the appeal folder marked as Annexure I to the show cause notice. Similarly loss has been alleged in respect of detergent powder appearing therein. Taking such figure into consideration, Revenue worked out what shall be the proportionate inadmissible CENVAT credit. That is contrary to law. 5. According to the appellant, there was certainly an increase in the trend of the loss in the course of repacking. But that was not deliberate t .....

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behaviour of the appellant causing prejudice to it in the course of repacking. Therefore, levy of duty of ₹ 14,29,131/- on scouring powder and ₹ 5,91,347/- on detergent powder is unsustainable. So also no interest or penalty imposable. 6. Revenue on the other hand supporting the adjudication says that when the appellant went on showing the increased loss year by year, the only way left for Revenue is to infer that the appellant has tendency of diverting the finished goods meant for .....

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aid, the proportionate CENVAT credit has to be disallowed on input. But there is no evidence on record to show that the goods subjected to MRP has been cleared clandestinely. That rules out the allegation against the appellant and there shall be no presumption of any diversification of the output repacked in absence of any cogent evidence and the contrary. In absence of any credible evidence to show that the goods came from the sister concern of the appellant has gone elsewhere without suffering .....

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ing out any cogent evidence to demonstrate that these losses were caused deliberately to avail CENVAT credit unreasonable or unlawfully. No doubt Revenue need not prove its case with mathematical precision, but it does not get the liberty to presume that the goods have been cleared clandestinely, in absence of any evidence. There is no iota of evidence in this regard. It is high time for Revenue atleast to witness a trial run in periodical intervals to ascertain the reality and also to ascertain .....

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ed in the show cause notice. 10. Law is well settled that there is no one to one correlation in CENVAT credit jurisprudence to allow CENVAT credit. This can be said following the Apex Court judgment in the case of Collector of Central Excise, Pune Vs. Dai Ichi Karkaria Ltd. - 1999 (112) ELT 353 (SC). For convenience of reading, para 17 thereof is reproduced below:- It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be use .....

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