2004 (9) TMI 445 - AT - Central Excise

Summary

Issues:
Appeal against common adjudication order for denial of Modvat credit; Allegation of excess consumption of costly inputs to avail higher Modvat credit; Disallowance of credit based on best judgment; Dispute regarding receipt and usage of inputs; Authenticity of private stock register; Comparison of private record with statutory record; Denial of credit without evidence of non-receipt or non-usage of inputs; Sustainability of demand based on stock register for only five months.

Analysis:
The case involves an appeal against a common adjudication order passed by the Commissioner of Central Excise, concerning the denial of Modvat credit to the appellants. The dispute arose from the allegation that the appellants had been showing excess consumption of costly inputs to avail higher Modvat credit, leading to a demand of Rs. 52,00,000 and imposition of penalties. The adjudicating authority disallowed credit based on best judgment, citing discrepancies in input consumption. The appellants contended that the demand was unsustainable as the adjudication order went beyond the scope of the show cause notice (SCN), which focused on non-receipt and non-payment of duty for inputs.

The Revenue argued that the appellants had shown excess consumption of certain inputs, justifying the denial of excess credit. The case revolved around the authenticity of the stock register maintained by the appellants, which purportedly reflected actual input consumption. However, discrepancies were noted between the private record and the statutory record, prompting the adjudicating authority to deny credit based on best judgment. The authority failed to provide concrete evidence of non-receipt or non-usage of inputs, relying solely on discrepancies in input consumption.

A significant aspect of the case was the comparison between the private stock register and the statutory records, which raised doubts about the accuracy of input consumption. The adjudicating authority acknowledged the lack of direct evidence to support the allegations of diversion of inputs or non-receipt by the appellants. Ultimately, the authority's decision to deny credit based on best judgment was deemed unjustified, especially considering the limited applicability of the stock register covering only five months. Consequently, the appeals were allowed, and the demand was set aside due to the insufficiency of evidence to support the denial of Modvat credit.