2004 (1) TMI 573 - AT - Central Excise

Summary

Issues:
1. Denial of modvat credit on goods found short.
2. Confiscation of goods found in excess.
3. Imposition of penalty on the appellants.

Analysis:

Issue 1: Denial of modvat credit on goods found short
The appellants contested the denial of modvat credit on goods found short in their factory premises. The officers of Central Excise visited the factory and discovered a shortage of PU foam for which modvat credit had been claimed. The appellants argued that the PU foam, being bulky and inflammable, was stored in the open space near the manufacturing hall. They presented a plan showing the open space near the hall as evidence. The Revenue contended that since the goods were not found in the factory, modvat credit should be denied. However, the statement of the authorized signatory indicated that the goods were indeed stored near the manufacturing hall. The Tribunal noted that there was no evidence to suggest that the goods were not stored in the disclosed open space. Consequently, the denial of modvat credit on this ground was deemed unsustainable, and the order denying the credit was set aside.

Issue 2: Confiscation of goods found in excess
The appellants did not contest the confiscation of goods found in excess in their factory. The excess goods were confiscated, but they were allowed to be redeemed upon payment of a redemption fine of Rs. 35,000. This aspect was not challenged by the appellants in the appeal.

Issue 3: Imposition of penalty on the appellants
In addition to the confiscation of excess goods, a penalty of Rs. 35,000 was imposed on the appellants. The Tribunal upheld the imposition of the penalty as the appellants had stored the goods in the open space without seeking permission, which was a violation. While the denial of modvat credit was set aside, the penalty was maintained due to the unauthorized storage of goods. The appeal was disposed of with the denial of modvat credit being overturned, but the penalty being upheld.

In conclusion, the Tribunal ruled in favor of the appellants regarding the denial of modvat credit on goods found short, citing lack of evidence to support the denial. However, the penalty imposed on the appellants for unauthorized storage of goods in the open space was upheld.