2004 (12) TMI 454 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on short found inputs.

Analysis:
The appeal filed by the Revenue concerns the denial of Modvat credit to the respondents on the short found inputs. The Revenue argued that the stock checking revealed discrepancies in the entries, specifically noting that entries in the register were incomplete and loose slips were found without corresponding entries in the statutory register. The Revenue contended that the duty demand was based on the shortage of inputs, not on clandestine manufacture of finished goods, and thus, the impugned order should be set aside.

On the other hand, the respondents' counsel argued that the incomplete entries were due to the illness of the official responsible for maintaining records. They also claimed that the raw materials listed in the loose slips were not factored into the shortage calculation. The respondents requested the matter to be sent back to the Commissioner (Appeals) for further verification.

After hearing both sides and reviewing the records, the Tribunal found that the entries in the statutory register were incomplete as of the inspection date. The Tribunal noted that the burden of proof regarding the shortage of inputs rested with the respondents, and the onus was not on the Revenue to prove mala fide intentions. The Tribunal highlighted that additional slips provided by the respondents needed to be authenticated to substantiate their claim of no input shortage.

The Tribunal criticized the approach taken by the Commissioner (Appeals), emphasizing that the duty demand was not related to clandestine activities but to the shortage of inputs. The Tribunal concluded that the Commissioner (Appeals) failed to address the core issue of proving or disproving the input shortage based on evidence submitted by the respondents. Therefore, the Tribunal set aside the impugned order and remanded the matter back to the Commissioner (Appeals) for a fresh decision after considering all relevant facts and issues.

In conclusion, the appeal of the Revenue was allowed by remanding the case for further examination by the Commissioner (Appeals) to determine the existence of the input shortage based on substantiated evidence provided by the respondents.