Demand for denial of credit on account of shortage of inputs found during internal stock taking.

PJ/Case Law/2012-13/2037

Case: - ESTER INDUSTRIES LTD. V/S COMMISSIONER OF CENTRAL EXCISE , MEERUT-II

Citation:- 2014 (33) S.T.R. 376 (TRI.-DEL.)

Brief Facts:- The appellant are engaged in the manufacture of Polyster Film and were availing the benefit of cenvat credit of duty paid on various inputs/capital goods as well as of service tax paid on input services. It is seen that as a result of audit objection, it was found that there was shortage of inputs in appellant’s factory on which they have taken credit to the extent of input Rs.250146/-. Accordingly proceedings were initiated resulting in confirmation of demand and imposition of penalty. The said order of the original adjudicating authority was upheld by commissioner (appeals). Hence present appeal.

Appellant’s Contention:- The advocate for the appellant contended that there was no actual shortage of the inputs and they were in position to give reconciliation of entire figures and such Reconciliation Statement has been placed before the Tribunal.

Respondent’s Contention:-The respondent reiterated the findings of the lower authorities.

Reasoning of Judgment:- After carefully hearing both the sides, it is found that the entire case of the revenue as regards shortage of cenvatable inputs is based upon the inventory made by the appellant himself during the course of their internal stock taking. There is no allegation or evidence that the said inputs were either not received by the appellant or stands cleared by them without payment of duty. As such, such shortage in the stock conducted by the appellant themselves for the purpose of reconciliation of their entire stock cannot be made the basis for confirmation of demand of duty against them or for imposition of penalty.
Accordingly, in the absence of any evidence to reflect up on clearance of such input, it is found that there is no justification for upholding the impugned order and accordingly it is set aside. The appeal is allowed with consequential relief.

Decision:- Appeal Allowed.

Comment:- This is a very strange case wherein the shortage of inputs found during the internal stock taking by the assessee has been made as grounds for confirming demand of excess credit taken. It was held in this case that in the absence of any evidence that such inputs were not received by the assessee or the assessee have cleared the said inputs without payment of duty, the allegation of excess credit cannot sustain. Moreover, assessee has also submitted the reconciliation statement thereby depicting the details of inputs and the credit taken by them. In view of the same, the assessee was held to be eligible for availing credit and the appeal was allowed.

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PJ/Case Law/2012-13/2037

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