2004 (8) TMI 512 - AT - Central Excise

Summary

Issues:
1. Demand of duty confirmed by the Assistant Commissioner.
2. Use of Modvat credit on inputs.
3. Quantity of finished products in relation to inputs used.
4. Demand on account of selling goods at a lower price.
5. Valuation of goods cleared.

Analysis:

1. The appeal was filed against the Order-in-Appeal upholding the duty demand confirmed by the Assistant Commissioner. The appellant, engaged in manufacturing ferro alloys and aluminum alloys, availed Modvat credit. The Assistant Commissioner demanded duty based on alleged discrepancies in input usage and goods pricing. The appellant contested these demands.

2. The appellant argued that Modvat Rules did not require a one-to-one correlation between inputs and final products due to various factors affecting production. The Assistant Commissioner claimed excess input usage without proper justification. The Tribunal noted that Modvat credit is only admissible if inputs are used in manufacturing final products. As the appellant failed to explain the discrepancy in input usage, the duty demand was upheld.

3. The Tribunal found no merit in the appellant's argument that there was no nexus between inputs and final products. While acknowledging factors affecting production, the appellant did not provide specific reasons for the input-output ratio discrepancy in the present case. As past records indicated a different ratio, the Tribunal upheld the duty demand due to the lack of evidence supporting full input utilization.

4. Regarding the demand related to selling goods at a lower price, the appellant demonstrated through invoices that the goods were of lower grade, justifying the reduced pricing. The Commissioner rejected the appeal for lack of documentary evidence, but the Tribunal found the invoices supported the appellant's claim. As the Department failed to prove otherwise, the assessable value could not be increased, leading to the appeal being allowed on this ground.

5. In conclusion, the Tribunal upheld the duty demand due to insufficient evidence of full input utilization but allowed the appeal on the valuation issue based on the supporting invoices. The judgment clarified the necessity of establishing a clear nexus between inputs and final products for Modvat credit eligibility and emphasized the importance of documentary evidence in disputes over goods valuation.