2004 (3) TMI 594 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat claim
2. Demand of duty on defective inputs
3. Demand of duty for failure to receive waste and scrap from job workers
4. Imposition of penalties

Analysis:
1. The appellants' appeal was against the order-in-appeal by the Commissioner (Appeals) denying the claim for Modvat and imposing demands along with penalties. The credit of duty of Rs. 66,350/- for computers was denied as they were not used as parts of machinery for production, a point not contested by the appellants, hence sustained.

2. A demand of duty of Rs. 47,057/- for defective inputs was confirmed as the duty was debited in the PLA. The appellants argued that duty should only be debited upon removal of defective inputs from the factory. The Tribunal noted that the inputs were physically available in the factory during investigation, leading to the setting aside of this part of the order.

3. A demand of duty for Rs. 2,228/- was confirmed due to the appellants' failure to receive waste and scrap from job workers during processing. The appellants argued that the loss was inherent during processing and should not attract duty. The Tribunal agreed that the loss of small particles during processing, which cannot be collected, does not warrant duty demand, setting aside this demand.

4. Penalties imposed were set aside as only a portion of the demand was sustained. The penalty of Rs. 1,00,000/- was reduced to Rs. 15,000 as it was deemed excessive. The appeal was partly allowed, modifying the impugned order accordingly.