Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2906

Denial of credit for shortage of inputs in absence of cogent evidences of clandestine removal.

Case:- H.M. PIPES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR
 
Citation:-2015 (325) E.L.T. 924 (Tri. - Del.)
  
Brief facts:- Appellant is in appeal against the impugned order wherein demand of duty has been confirmed on shortage of inputs found at the time of visit.
The facts of the case are that on 26-10-2009, a search was conducted in the premises of appellant. It was found that as per statutory records there was stock of 5,61,330 Kgs. whereas on verification physical stock was found to be 4,86,000 Kgs. A statement of Director of the appellant was recorded who admitted the shortages but when asked for reason for shortages, he explained that appellant has not taken the stock position for a long time. Thereafter the appellant paid the duty on shortages. A show cause notice was issued to the appellant for appropriation of the said amount and for imposition of penalty under the provisions of Central Excise law. Matter was adjudicated. Demand of duty along with interest was confirmed. Penalty was also imposed. On appeal, learned Commissioner (Appeals) confirmed the order of adjudication. Aggrieved from the said order, appellants is before them.
 
Appellant’s contention:-Shri Bipin Garg, learned advocate for the appellant appeared and submit that appellant is manufacturer of plastic pipes and HDPE granules, the raw material. They started their factory in the year 2000 and they are clearing the goods on payment of duty. During the course of verification of stock, on 26-10-2009, a shortage of 75.330 MT was found, that might be due to wastage of stock during the course of manufacturing, but it is not admitted by the Director of the appellant during the course of investigation and that shortage is due to clearance of storage of stock of goods what they have manufactured clandestinely. Although they have paid the duty on pointing out by the department, it does not mean that they have admitted the shortage. In these circumstances, without any cogent evidence of clandestine clearance of the goods, duty cannot be demanded. To support this contention, the appellant relied on the decision of CCE, Damanv. Nissan Thermoware P. Ltd. [2011 (266)E.L.T.45 (Guj.); CCE, Chandigarhv. H.S. Steels (P) Ltd. [2010 (254)E.L.T.465 (Tri.-Del.)]which has been affirmed by Hon’ble Punjab and Haryana High Court as reported in [2012 (286) E.L.T. A178 (P&H)]. Therefore, he prayed that impugned order be set aside.
 
Respondent’s contention:-On the other hand, learned AR submits that during the course of verification of stock, the Director himself has admitted the shortage and paid the duty. When the appellant themselves admitted their guilt, therefore, Revenue is not required to prove with cogent evidence that they have clandestinely removed the goods/inputs. He relied on the decision of Hon’ble High Court of Allahabad in the case of Sarin and Sarin {[2015] 54 taxmann.com 147 (Allahabad)} to support his contention. He also relied on the decision of Bajrang Petro Chemicals (P) Ltd.v. CCE, Kanpur [2014-TIOL-2254-HC-ALL-CXI = 2015 (317)E.L.T.243 (All.)].
 
Reasoning of judgment:-In this case, it is admitted fact that during the course of verification of stock of inputs, there was shortages and have been explained by the Director that these shortages were due to the reason that they have not taken their stock position since long. It is also a fact that process of manufacturing of appellant is like that where HDPE granules goes waste. The appellant has paid duty on the shortages at the time of investigation itself. But the contest done by the appellant on issuance of show cause notice shows the intent of the appellant. In these circumstances, burden lies on the Revenue to prove that the shortages were due to reason of clandestine removal of the goods. To that effect, no evidence has been brought on by the Revenue. Moreover, the learned AR relied on the decision of Hon’ble High Court of Allahabad High Court in the case of Sarin v. Sarin (supra) wherein the facts of the case were that during the course of investigation, the shortages of material was found as well as unaccounted cash was also found in the premises of assessee. In these circumstances, when the assessee fails to explain the reason of shortage as well as unaccounted cash, the Hon’ble High Court arrived at a decision that shortages are due to the reason of clandestine removal. He also relied on the decision of Bajrang Petrochemicals Ltd. wherein the observation of the Hon’ble High Court is that there was huge shortage of finished goods while during taking stock. It is not the case of the stock taking of finished goods. It is a case of inputs. In these circumstances, they hold that decision relied upon by the learned AR are of no help to the Revenue Further in the case of Nissan Thermoware P. Ltd. (supra), the Hon’ble High Court of Gujarat has observed that when the raw material was found short on verification of stock and same has been admitted by the Director, is not sufficient evidence to allege clandestine removal of the inputs. In this case, inputs were found short but same has been explained by the Director that as they have not taken the stock position since long, that might be the reason of shortage. These facts have not been appreciated by the lower authorities. In these circumstances, they rely on the decision of Nissan Thermoware P. Ltd. (supra) that held that in the absence of any cogent evidence of removal of inputs clandestinely, the cenvat credit cannot be denied on shortage of inputs to the appellants. With these terms, the impugned order is set aside. Appeal is allowed with consequential relief, if any.
 
Decision:-Appeal allowed
 
Comment:-The analogy of the case is that cenvat credit cannot be denied for shortage of inputs detected during the course of stock verification. In the present case, during the course of verification of stock of inputs, there were shortages and it was explained by the Director that these shortages were due to the reason that they have not taken their stock position since long. Although assessee has paid differential duty at the time of investigation, clandestine clearance was not admitted and shortages were explained as resulting from wastage during manufacturing process and because stock assessment had not been undertaken since long. There was no evidence that shortages were due to clandestine clearance and so cenvat credit was allowed.

Prepared by:- Monika Tak

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com