2002 (5) TMI 137 - AT - Central Excise

Summary

Issues involved: Disallowance of Modvat credit, penalty imposition, liability for interest on disallowed credit.

Summary:
The proceedings were initiated against the appellant for disallowance of Modvat credit availed during 1994-95 to 1996-97, along with penalty imposition. It was observed that material purchased from a specific source was being sold as non-modvatable scrap, while material from other sources was sold as modvatable scrap. Statements were recorded, and discrepancies were noted in the transactions. Show cause notices were issued to explain the disallowance of Modvat credit and penalty imposition. The appellant contended that the material supplied was from the specified source, supported by available stock material. The Commissioner upheld the disallowance based on the evidence presented.

Arguing for the appellant, it was emphasized that Modvat credit was received from registered dealers, and there was no evidence to show irregularities in the invoices. Reference was made to a Board's Circular regarding verification procedures for duty-paid goods. The appellant's position was supported by a Tribunal judgment regarding the obligation of manufacturers in such cases. It was further argued that the Department failed to provide evidence contradicting the appellant's claims regarding the source of scrap material.

The Tribunal noted that no effort was made to verify the modvatable status of the scrap material during the visit to the premises. The invoices from registered dealers were not found to be fraudulent, shifting any responsibility for duty payment discrepancies to the dealers. The lack of concrete evidence, apart from employee statements, weakened the case against the appellant. Considering the complexities of the scrap market, the Tribunal found merit in the appellant's argument. The appeal was allowed, granting consequential relief as per the law.