2004 (8) TMI 164 - AT - Central Excise

Summary

Issues:
1. Confiscation of excess finished goods and imposition of redemption fine.
2. Denial of Modvat credit on shortage of raw material.

Confiscation of Excess Finished Goods and Imposition of Redemption Fine:
The appeal was filed against the Order-in-Appeal by M/s. K-Three Electronics Pvt. Ltd., challenging the confiscation of excess finished goods and imposition of a redemption fine. The Appellants argued that the finished goods were awaiting inspection and not being removed clandestinely. They cited precedents where confiscation was set aside due to lack of evidence of malafide intent. However, the Tribunal held that failure to account for manufactured goods is grounds for confiscation, irrespective of removal attempts. The judgment referenced Rule 25 of Central Excise Rules, stating that goods not accounted for can be confiscated. The Tribunal agreed that the redemption fine was excessive and reduced it to Rs. 80,000.

Denial of Modvat Credit on Shortage of Raw Material:
Regarding the shortage of raw material, the Appellants claimed the loss was minor and permissible as storage loss. They relied on previous cases where storage loss was allowed. However, the Tribunal upheld the denial of Modvat credit as the missing inputs were not used in manufacturing the final product. The judgment emphasized that Modvat credit is only available when inputs are utilized in or related to final product manufacturing. The Tribunal noted the absence of evidence supporting the allowance of Modvat credit for storage losses as in the case of Kesar Enterprises Ltd. The denial of Modvat credit on the missing inputs was upheld.

In conclusion, the Tribunal ruled in favor of confiscating the excess finished goods but reduced the redemption fine. Additionally, the denial of Modvat credit on the shortage of raw material was upheld based on the inputs not being utilized in final product manufacturing. The appeal was disposed of accordingly, with the Appellants not pressing their appeal on Central Excise duty for finished goods found short.