Tribunal committed error in not considering the aspect that income tax return in the Form of 3-CD Reports

PJ/Case Laws/2011-12/1187

Case: Commissioner of C. Ex. And Customs, Daman versus Narendra Impex

Citation: 2011 (265) E.L.T. 332 (Guj.)

Issue:-

Whether the Tribunal committed error in not considering the aspect that income tax return in the Form of 3-CD Reports are in nature of statutory admission of assessee about short receipt of inputs and binding to the assessee?
Whether the Tribunal committed error in not appreciating that there was no detail of loss of raw material while manufacturing goods?

Brief Facts:- Respondent-assessee is engaged in manufacturing Plastic Lay Flat Tubing, Plastic Films, and Plastic Bags etc. falling under Chapter 39. During the audit, it was observed that as per the 3-CD Report given to the Income Tax Department the assessee has received the short quantity of Plastic Powder and availed Cenvat Credit on that short–received quantity also. So, the Show Cause Notice was issued to assessee for payment of amount wrongly availed as credit along with interest and penalty.

The SCN was dropped by the Adjudicating Authority.

Against that order, Revenue filed appeal before the Commissioner (A), who allowed the appeal and held that assessee had wrongly availed cenvat credit which was not admissible to it and accordingly confirmed the demand of CENVAT credit alongwith interest and penalty.

Against the order of the Commissioner (A), the assessee filed an appeal before the Tribunal. The Tribunal has allowed appeal filed by the assessee. So, Revenue has presented this Appeal before the High Court.

Appellant’s Contentions:- Revenue submitted that the assessee had submitted 3-CD Tax Report prepared by the CA wherein it was admitted that the raw material had been received in short quantity. In appeal before the Commissioner (A) also, the assessee had not find any case to show that the raw material had in fact not been received in short quantity as stated in 3-CD Tax Report. It was submitted that Form 3-CD is a valid and statutory document and as such, the assessee was bound by what was stated therein. That in absence of any evidence being produced by the assessee to indicate that the disputed short-quantity of raw material was due to process loss, the Commissioner (A) had rightly held that the assessee had wrongly availed of the CENVAT credit and that the Tribunal was not justified in setting aside the order passed by the Commissioner (A).

Reasoning of Judgment:- The High Court held that the Adjudicating Authority has applied his mind to the fact as to whether the shortage in quantity of inputs mentioned in the Form 3-CD Tax Audit Report pertains to the quantity of inputs short received by the assessee or as to whether the said quantity represents the quantity of process loss and shortage on account of weight variations, etc. The Adjudicating Authority has not denied that the Cenvat Credit on process loss is admissible and cannot be denied. That was the point to be considered as to whether there was short receipt of raw material or the shortage was on account of process/ manufacturing loss.

It was held that the onus to prove that the material is short received or not received lies on the department. The department has no collaborative evidence that the shortage was on account of short receipt of raw material.

The Adjudicating Authority has noted that the blow molding process of the manufacture of plastic granules requires the granules to be heated for melting, which results in certain process losses, which has been considered to be acceptable by the Board.

It was held that the Commissioner (A) has allowed the appeal filed by the Revenue only on the ground that 3-CD Tax Report is a valid and statutory document and in that short quantity of the raw material was admitted.

There was no allegation that the assessee had availed the Cenvat Credit in excess of the duty paid by the supplier of the inputs. The Tribunal had further noted that there was some processing loss during Blow Moulding Process and that the loss claimed by the assessee was not on the higher side.

The High Court held that the mode of proof of quantity and payment of duty on inputs received and used as inputs is by producing invoices. Unless, the invoices are found to be wrong or diversion of inputs received under any invoice to any other use is found, the assessee is entitled to avail of the cenvat credit in terms of invoices issued by the supplier.

In absence of any evidence to indicate short receipt of material, merely because there is some discrepancies between the quantity stated in the invoice and that shown in the 3-CD Report, it cannot be presumed that there was in fact short receipt of raw material.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1187

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