2002 (10) TMI 514 - AT - Central Excise

Issues Involved:
1. Duty demand on captively consumed parts.
2. Modvat credit entitlement.
3. Penalty imposition.
4. Valuation of dutiable parts.
5. Allegations of clandestine removal.
6. Sale of scrap.
7. Disallowance of Modvat credit on inputs used in burners.

Issue-wise Detailed Analysis:

1. Duty Demand on Captively Consumed Parts:
The appellants were liable to pay duty on parts manufactured and used in the production of stoves during the disputed period. They failed to pay the appropriate duty amounting to Rs. 11,26,487/-. The adjudicating authority rightly affirmed this duty demand.

2. Modvat Credit Entitlement:
The appellants contested that Modvat credit on parts was not allowed by the adjudicating authority. Previously, Modvat credit was granted in an order dated 22-12-97. The Tribunal remanded the case to determine the marketability of goods and penalties. The adjudicating authority did not address the Modvat credit claim post-remand. The appellants are entitled to Modvat credit as per law/rules, and duty should be adjusted accordingly.

3. Penalty Imposition:
The penalty imposed was deemed excessive. The penalty amount was reduced to Rs. 20,000/-, considering the duty would decrease substantially after Modvat credit adjustment. The redemption fine of Rs. 10,000/- was maintained.

4. Valuation of Dutiable Parts:
The adjudicating authority confirmed a duty demand of Rs. 44,78,777/- under valuation. The assessable value was calculated by deducting certain expenses from the selling price. The appellants provided two valuation reports, one by a Chartered Accountant and another by a Cost Accountant. The adjudicating authority should have accepted the Cost Accountant's report, which showed a higher assessable value. The duty payable under this head was reduced to Rs. 10,96,298/-.

5. Allegations of Clandestine Removal:
A duty demand of Rs. 46,93,871/- was raised based on the quantity of raw materials found short. No concrete evidence was provided to prove clandestine removal. The adjudicating authority ignored the appellants' explanations regarding wastage and destruction due to fire. The charge of clandestine removal was not substantiated, and the duty demand under this head was set aside.

6. Sale of Scrap:
The appellants were charged a duty demand of Rs. 47,270/- on scrap sales. They argued that the total value included non-Modvat credit scrap and asbestos scrap. The adjudicating authority ignored these facts and the inclusion of sales tax in the value. The differential duty on scrap sales was set aside due to lack of tangible evidence.

7. Disallowance of Modvat Credit on Inputs Used in Burners:
Modvat credit of Rs. 21,79,404/- was disallowed while the duty on burners (Rs. 5,39,932/-) was dropped. The appellants provided details showing the correct recoverable Modvat credit as Rs. 3,74,697/-. The adjudicating authority did not question these details. Thus, the recovery of Modvat credit was confirmed at Rs. 3,74,697/-.

Penalties:
- The penalty on appellant No. 1 Company was reduced from Rs. 10 lakhs to Rs. 1 lakh.
- The penalty on appellant No. 2, Managing Director, was reduced from Rs. 10 lakhs to Rs. 25,000/-.

Conclusion:
The impugned orders in all three appeals were modified as discussed. The appeals and cross objections of the Revenue were disposed of accordingly.

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