2008 (2) TMI 404 - HC - Central Excise

Recovery of Cenvat / Modvat Credit inputs found short and written off in books of account - The petitioner provisionally debited an amount of Rs.1.50 lakhs on 22-5-1999 towards the short fall of Modvat inputs and undertaken to pay the balance, if any. The petitioner declared the inputs as shortage and written off in the balance sheet. So, that shows that the goods are not available and it has not been used for in or in relation to manufacture of any excisable goods. Rule 57-I provides for recovery f credit wrongly availed or utilised in irregular manner. Hence, in respect of the goods, which are found shortage and written off in the books of account on which credit has been taken, is sought to be reversed and in default of the same, penal consequences are taken against the petitioner appeal dismissed

Summary

Issues:
- Direction to Tribunal to draw up a statement of facts and refer the question of law regarding apparent shortage of inputs and contravention of Rule 57F and Rule 57-I of Central Excise Rules.

Analysis:
The petitioner, engaged in manufacturing solenoid valves, faced a dispute with the Excise Department over the reversal of credit availed on inputs declared as shortages and written off in their books for the years 1994-95 to 1998-99, amounting to Rs.13,36,134.33. The Department contended that the petitioner failed to inform about any shortfall, as required, and did not reverse the availed credit. The petitioner provisionally debited Rs.1.50 lakhs towards the shortfall of Modvat inputs and agreed to pay any balance due. The petitioner declared the inputs as shortages and written them off in the balance sheet, indicating they were not available for manufacturing excisable goods. Rule 57-I allows for the recovery of wrongly availed credit, and penal consequences can be imposed for non-compliance. The High Court found no question of law warranting a reference to the Tribunal, as the subsequent change in the authorities' view on the shortage of goods was not sufficient grounds for a legal query.

In conclusion, the High Court dismissed the reference case petition, stating that no question of law arose that necessitated directing the Tribunal to draw up a statement of facts and refer the matter for resolution. The Court emphasized that the change in the authorities' view in subsequent years regarding the shortage of goods did not justify formulating a legal question.