1999 (9) TMI 235 - AT - Central Excise

Summary

Issues Involved:
1. Whether the consumption of inputs was more than what was required in the vehicles produced.
2. Whether there was a difference between the R.G. 23A Part I and physical stock of inputs.
3. Duty liability on inputs rejected on the line or taken for parts for special use.
4. Accounting of tyres sent for repairs under Rule 57F.
5. Eligibility of Modvat credit for damaged inputs during manufacturing.

Detailed Analysis:

Issue 1: Consumption of Inputs
The Commissioner held that the appellants showed more consumption of inputs than actually used in the vehicles produced. The figures supplied by the appellants lacked corroborative backing, and the shortages detected and computed in Annexure I to the SCN were accepted. The Tribunal found that the appellant's request for a worksheet and reconciliation of figures was not initially granted. However, such a worksheet was later provided by the Assistant Commissioner after adjudication. The Tribunal remanded the matter to the lower authorities for reconciliation of figures and recalculation of the demand. Upon rechecking, the duty payable on shortages of tyres, air conditioners, and stereos was recalculated to Rs. 62,74,754.00, with an adjustment for 1500 tyres accounted for twice, bringing the sustainable amount to Rs. 59,99,754/-.

Issue 2: Difference in R.G. 23A Part I and Physical Stock
The Commissioner confirmed a demand of Rs. 14,80,388 based on the difference between the R.G. 23A Part I and the physical stock of inputs. Upon further scrutiny, the Tribunal confirmed the recalculated demand of Rs. 4,44,460/- for shortages noticed during physical verification.

Issue 3: Duty on Rejected Inputs and Parts for Special Use
The Commissioner held that the reversal of Modvat credit on PSU's was not disputed as the appellants had already debited the duty. Regarding line rejections, the Commissioner differentiated between inputs defective due to material defects or vendor faults and those damaged due to mishandling by workers. The latter was not considered waste under Rule 57F(4). The Tribunal held that the amount of Rs. 1,14,502.84 for PSU should be debited as it had not been previously accounted for.

Issue 4: Tyres Sent for Repairs under Rule 57F
The Tribunal found that 5699 tyres were reported sent to job workers for remaking, but no proper account for their receipt back was maintained. Therefore, the duty involved on these tyres should be debited subject to verification of their receipt.

Issue 5: Eligibility of Modvat Credit for Damaged Inputs
The Tribunal held that tyres, air conditioners, and stereos damaged during the assembly process are eligible for Modvat credit under Rule 57D as inputs contained in waste and scrap. This was supported by previous judgments where credit was allowed for inputs rendered unfit during the manufacturing process.

Penalty:
The Tribunal reduced the penalty from Rs. 2 lakhs to Rs. 1 lakh, considering it was on the higher side.

Conclusion:
The impugned order was modified to reflect the recalculated duty demands, adjustments for verified discrepancies, and a reduced penalty. The appeal was disposed of accordingly.