2003 (2) TMI 117 - AT - Central Excise

Summary

Issues Involved: Appeal against adjudication order confirming demand, imposition of penalties under Rule 173Q and Rule 57-I(4) of Central Excise Rules, denial of Modvat credit on inputs written off in Cost Audit Report.

Adjudication Order and Appeal: The applicants appealed against an order confirming a demand of Rs. 20,87,680/- and imposing penalties of Rs. 12 lakhs u/r 173Q and Rs. 10,34,043/- u/s Rule 57-I(4) read with Rule 173Q of Central Excise Rules.

Facts of the Case: The appellants, engaged in manufacturing Wires and Cables, availed Modvat credit for inputs used in final product manufacture. The Cost Audit Report revealed inputs worth Rs. 20,87,680/- were written off without reversing the credit, leading to a show cause notice and the impugned order.

Contentions: The appellants argued that the write-off was a standard auditing practice to reflect the true financial position, citing a Board Circular and a Tribunal decision to support their claim that credit cannot be denied if inputs are physically available in the factory.

Decision and Rationale: The Tribunal noted that the inputs for which Modvat credit was sought were written off in the Audit Report, indicating they were not used in final product manufacture. Referring to the Board Circular, it held that if unused inputs were fully written off, credit must be reversed. Despite appellants' reliance on a previous case, the Tribunal found no evidence of inputs being physically available or used in final products. The penalty was reduced to Rs. 50,000/- under Rule 173Q and Rule 57-I(4) for the interests of justice, while upholding the denial of Modvat credit.

This summary captures the key issues, arguments, and the Tribunal's decision in the case involving the denial of Modvat credit on inputs written off in a Cost Audit Report.