2010 (1) TMI 1027 - AT - Central Excise

Issues Involved:
1. Wrong availment of Modvat credit due to application of different grades.
2. Discrepancy in Modvat credit due to non-use/non-receipt of imported materials as indicated in Balance Sheets.

Summary:

Issue 1: Wrong Availment of Modvat Credit Due to Application of Different Grades

The main allegation is that the appellant availed Modvat credit on certain inputs which were not received in their factory and used a lesser grade granules than what was shown as delivered in the invoices. The adjudicating authority disallowed Modvat credit on the grounds of wrong availment with reference to the application of different grades during the period from 29-4-98 to 20-11-99 amounting to Rs. 4,24,022.00 and from 15-6-2000 to 19-6-2000 and on 28-5-2000 due to discrepancy between HD 53 EA 010 PA and without PA and E/45A/033 0479050 grades amounting to Rs. 2,20,347.00.

The Tribunal found that the appellant had manufactured finished goods, i.e., HDPE pipes, and cleared the same on appropriate payment of duty. The issue was settled in favor of the appellant by the decision of the Coordinate Bench in the case of Indian Polypipes v. Commissioner of Central Excise, Kolkata-I [2003 (157) E.L.T. 652 (T)], which held that blending/mixing of different grades of virgin HDPE raw materials is possible to produce HDPE material for pipe purposes as per DOT specifications. The Tribunal set aside the impugned order confirming the demand of duty and penalties on the first two categories of wrong availment of credit and input quality discrepancies.

Issue 2: Discrepancy in Modvat Credit Due to Non-Use/Non-Receipt of Imported Materials as Indicated in Balance Sheets

The demand of duty amounting to Rs. 24,81,895/- was confirmed based on the allegation that the appellant had not received consignments of HDPE granules, which were imported by them, and all the entries were only book entries as indicated by the Balance Sheets showing 'nil' receipt of imported raw materials. The Tribunal found that the balance sheets for the period 1995-96 to 1998-99 indicated 'nil' consumption of imported raw materials, but a corrigendum issued by the Chartered Accountant clarified that there was consumption of imported raw materials in the manufacture of finished goods. The Tribunal noted that the adjudicating authority did not consider the statutory records (RG 23A Part I & II) maintained by the appellant, which recorded the receipt and issue of the imported granules.

The Tribunal remanded the matter back to the adjudicating authority for the limited purpose of verifying the statutory records regarding the receipt and consumption of imported raw materials and to arrive at a fresh conclusion. The adjudicating authority was directed to grant an opportunity of personal hearing to the appellant before arriving at a conclusion on this point. The penalties imposed on the officers of the company were deemed unwarranted and were set aside.

Conclusion:

The appeals were partly allowed, setting aside the impugned order on the first issue and remanding the second issue back to the adjudicating authority for fresh consideration based on statutory records. The penalties on the officers of the company were also set aside.

(Pronounced in the court on 18-1-2010)

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