2005 (10) TMI 326 - AT - Central Excise

Summary

Issues involved: Appeal against Order-in-Appeal regarding demand for irregular Modvat credit, penalty under Rule 57AH(2) u/s 11AC of Central Excise Rules, 1944, and interest.

Summary:
The appellant availed Modvat credit on inputs but faced shortage during physical verification, leading to a demand for irregular Modvat credit, penalty, and interest. The Commissioner (Appeals) upheld the demand, prompting the appeal before the Tribunal. The appellant argued that the shortage was minimal (0.6%) compared to the inputs used, with some components showing excess. Citing case laws, the appellant contended that reasonable shortages should be condoned. The Revenue reiterated its stance from the Order-in-Appeal.

Upon careful review, the Tribunal found discrepancies in input quantities due to clerical errors, issue of similar items, and replacement of damaged items without proper recording. Recognizing the challenges in accounting for a large number of inputs, the Tribunal noted that minor variations are common and should not attract duty demands without evidence of malintent. Referring to precedent, the Tribunal deemed the 0.6% shortage reasonable and dismissed the duty demand. Lack of evidence of clandestine removal or improper credit usage further supported the appellant's case. Consequently, the Tribunal set aside the Order-in-Appeal and allowed the appeal.

*(Operative portion of the order has been pronounced in the Court on completion of hearing)*