2004 (1) TMI 550 - AT - Central Excise

Summary

Issues:
1. Denial of MODVAT credit on Dipped Synthetic Fabrics
2. Confiscation of goods found in excess in the factory

Denial of MODVAT credit on Dipped Synthetic Fabrics:
The appellants, engaged in manufacturing Conveyor Belts and Transmission Belts, availed MODVAT credit for inputs used in their final product. However, a shortage of Dipped Synthetic Fabrics, an input, was discovered during a Revenue Department visit. A show cause notice was issued for denying MODVAT on the shortage and for confiscating excess goods. The adjudicating authority confirmed a duty demand of Rs. 23,040 for the shortage and allowed excess goods' release on payment of Rs. 2,15,000, imposing a penalty of Rs. 45,000. The Commissioner (Appeals) reduced the redemption fine and penalty. The appellants argued that the shortage was of fabrics imported under the DEEC Scheme without paying CVD duty, thus not availing credit. They contended that denying credit on the shortage was unjustified.

Confiscation of goods found in excess in the factory:
Regarding the excess goods, the appellants claimed these were specifically ordered by customers and intended for export against orders. The Revenue argued that the imported Dipped Synthetic Fabrics were for actual users under the DEEC Scheme, and as they were found short, a separate notice was issued. Citing a High Court decision, the Revenue asserted that unaccounted goods in the factory are liable for confiscation. The tribunal noted separate proceedings for the shortage were pending and not part of the current adjudication. Upholding the confiscation of excess goods based on the High Court decision, the appeal was dismissed.

This judgment addresses the denial of MODVAT credit on Dipped Synthetic Fabrics due to a shortage and the confiscation of excess goods in the factory. The tribunal considered the appellants' arguments regarding the import under the DEEC Scheme and the intended use of excess goods for specific customer orders and exports. The Revenue's reliance on legal precedents for confiscation and the separate proceedings for the shortage were crucial in the decision. Ultimately, the tribunal upheld the confiscation of excess goods based on the High Court decision, dismissing the appeal.