2005 (6) TMI 515 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit based on discrepancy in raw material sent for conversion.
2. Discrepancy in burning loss claimed by job worker and actual loss observed in returned goods.

Issue 1: Denial of Modvat credit based on discrepancy in raw material sent for conversion

The appellant was denied Modvat credit amounting to Rs. 95,822/- due to a difference in the quantity of raw material sent for conversion and the quantity of finished goods received back. The Revenue contended that the job worker claimed a 6% burning loss during conversion, but the actual goods received showed a 10% loss. Consequently, Modvat credit on the remaining 4% of inputs was confirmed by the authorities. The appellant argued that the demand against the job worker was dropped for lack of evidence of clearance of the 4% inputs, and a higher burning loss claim does not necessarily indicate clandestine activities.

Issue 2: Discrepancy in burning loss claimed by job worker and actual loss observed in returned goods

Upon review, the Tribunal found that the Revenue failed to provide evidence showing that the burning loss at the job worker's end was indeed less than 10%. Referring to a previous case, the Tribunal highlighted that a higher burning loss claim does not automatically imply clandestine removal. Citing a circular issued by the Board, it was noted that denying duty credit based on inputs found in waste or scrap is not permissible. Since there was no additional evidence indicating improper handling of inputs by the appellant, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Mumbai addressed the denial of Modvat credit to the appellant based on discrepancies in raw material conversion and burning loss claims. The Tribunal emphasized the lack of conclusive evidence supporting the Revenue's position and ruled in favor of the appellant, highlighting the importance of adhering to legal provisions and established principles in such matters.