2016 (4) TMI 19 - AT - Central Excise

MODVAT Credit denied - stock taking taken by the statutory auditors of the appellant was sufficient to hold that the inputs were diverted by the appellant and accordingly, demand of CENVAT Credit and imposition of penalty has been correctly adjudicated against the appellant - Held that - The appellant is engaged in the manufacture of Aluminium and calcined alumina. Certain shortages in the inputs were noticed as per the statutory audit undertaken by the appellant. It is the case of the appellant that the said stock taking was not correct as reconciliation done at the end of the financial year indicated excess of raw materials The stock verifier s report also indicated that the approval of various representatives of the assessee who were also associated with the Chartered Accountant was taken of the manner of verification. The stock verification was done in the presence of the custodian of the bagged calcined alumina, Internal Audit Department, Representative of Finance Department and the Departmental Representative of Raw Materials. The report also shows that the discrepancies and reconciliation were discussed with the concerned officials during the course of verification as well as while finalizing the report. The report further goes on to say that the findings of the Auditor of M/s. R.K. Das & Associates for the year 1992-93, 1993-94 and 1994-95, have duly been accepted by the assessee and the shortage detected are found to have been accordingly incorporated in trial balance in Schedule A-10 and that the physical verification report of M/s. R.K. Das & Associates, has been accepted. Having regard to the fact there were separate bin cards; that the responsible officers of the appellants company were associated with the stock verification; that verification was done in their presence and the method of verification was approved by them. No room is left for any doubt that there were shortage of bagged calcined alumina and we hold accordingly - Decided in favour of assessee.

Summary

Issues: Disallowance and confirmation of MODVAT Credit, imposition of penalty under Central Excise Rules, 1994.

Analysis:
1. The appellant filed an appeal against Order-in-Original No. CCE/BBSR-I/41/2001 dated 20/12/2001 by the Commissioner of Central Excise & Customs, BBSR-I. The order disallowed and confirmed MODVAT Credit of ?22,24,046/- under rule 57 I (2) of Central Excise Rules, 1994, imposed interest, and a penalty of ?5.00 Lakhs under Rule 173Q of the Central Excise Rules, 1994.

2. The appellant did not appear during the hearing, and no request for adjournment was made. As the appeal pertained to 2002, it could not be kept pending any longer.

3. The Revenue representative argued that the appellant diverted inputs based on stocktaking by statutory auditors. Citing a case law, it was contended that the demand of CENVAT Credit and penalty imposition were correctly adjudicated.

4. The appellant, engaged in manufacturing Aluminium and calcined alumina, disputed shortages in inputs found during statutory audit. Despite the appellant's claim of excess raw materials upon year-end reconciliation, the Bench referred to a case law NALCO Vs. CCE, BBSR-I, which highlighted discrepancies in the stock verification process. The Bench emphasized the importance of accurate records and approved verification methods.

5. The appeal was rejected based on the settled proposition of law in a similar case involving the appellant. The judgment upheld the disallowance of MODVAT Credit and penalty imposition as per the Central Excise Rules, 1994, following the findings and observations made during the proceedings.

This detailed analysis of the judgment provides insights into the issues raised, arguments presented, and the final decision rendered by the Appellate Tribunal CESTAT KOLKATA regarding the disallowance of MODVAT Credit and penalty imposition under the Central Excise Rules, 1994.