2004 (1) TMI 238 - AT - Central Excise

Summary

Issues:
Validity of impugned order-in-appeal reversing order-in-original, duty & penalty set aside, Modvat credit allowed, admission of shortage by director, weighment of goods, admission binding on company, liability to pay duty and Modvat credit, legal sustenance of impugned order, relevance of confessional statement, admission as evidence, requirement of actual weighment, legal implications of admission.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi questioned the validity of the impugned order-in-appeal that reversed the order-in-original, setting aside duty & penalty while allowing Modvat credit, confirmed by the adjudicating authority. The Revenue contended that the Commissioner (Appeals) failed to consider the confessional statement of the director and wrongly set aside the order-in-original, arguing that clandestine removal was not proven and proper methods were not used to ascertain the shortage. On the other hand, the respondents alleged that correct procedures were not followed in determining the shortage of finished goods and relied on legal precedents to support their position. The Tribunal analyzed the facts, noting that the director admitted the shortage during a surprise visit by Central Excise officers, expressed satisfaction with the verification process, and initially agreed to pay the duty. Despite later requesting a show cause notice, he did not retract his admission or dispute the procedure followed. The Tribunal emphasized that the admission was binding on the company, rejecting the argument that weighment was necessary to prove shortage or clandestine removal. The Commissioner (Appeals) was criticized for overlooking the legal significance of the admission and setting aside the order-in-original. The Tribunal upheld the duty liability for the shortage of finished goods and Modvat credit on inputs, dismissing the respondents' cross-objections and allowing the Revenue's appeal.

In conclusion, the Tribunal found the respondents liable to pay duty on the shortage of finished goods and recover Modvat credit on the inputs, based on the binding admission of the director. The legal sustenance of the impugned order-in-appeal was questioned, emphasizing the evidentiary value of the director's admission and the lack of necessity for actual weighment to establish liability. The Tribunal set aside the Commissioner (Appeals) decision, maintaining the order-in-original and dismissing the respondents' cross-objections. The appeal of the Revenue was allowed, affirming the duty and Modvat credit liabilities on the respondents.