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Minor variations in stock due to human error with no evidence of short receipt or clandestine removal - credit admissible: CESTAT

By TIOL News Service

MUMBAI, NOV 16, 2016: ON scrutiny of records, the jurisdictional authorities observed that there was discrepancy in the inventory of inputs involving CENVAT credit of Rs.32,28,644/-.

SCN was issued alleging that inputs were not consumed in or in relation to the manufacture of final products and, therefore, demand notice was issued for recovery of credit. The same was confirmed and penalty of Rs.2 lakhs was imposed.

As the Commissioner (Appeals) concurred with the AA and rejected the appeal, the appellant is before the CESTAT.

The appellant submitted that the discrepancy in the input inventory is not due to short receipt of input or removal of input from the factory, but it is due to human error in issuing inputs to the production plant or error in making entry in the record maintained on computer; that the difference is meager to the tune of 0.08% as against movement of huge inputs in the production; that in the SCN and in the orders of the lower authorities there is no allegation or evidence that appellant had either not received the inputs or removed the same clandestinely. Reliance is placed on their own case involving identical issue - 2016-TIOL-1027-CESTAT-MUM.

The AR reiterated the findings of the impugned order.

The Bench observed -

"5. I find that there is discrepancy in the inventory of input on which Cenvat credit being taken by the appellant but discrepancy is only to the extent of 0.08%. It cannot be ruled out that in a big industry, there is always possibility of minor variations in the stock, which occurred due to human error. Moreover, in the present case neither there is any evidence to show that differences in input inventory is either due to short receipt or cleared from factory clandestinely. In such a situation, even if there is shortage of input, the same must be lying in the factory. On the identical issue in the appellant's own case cited by the ld. Counsel, this Tribunal has decided the issue …"

Following the ratio of the Tribunal decision which was based on the apex court judgment in Maruti Suzuki India Ltd. - 2015-TIOL-326-SC-CX, the Bench held that the CENVAT credit cannot be disallowed.

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-2976-CESTAT-MUM)


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