9911796707
TMI Blog2004 (6) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of rules relating to utilisation of inputs. The demand is merely based on the shortages detected during physical tallying, that too without taking into account the excesses noticed. Since there is no evidence, that the excesses are not the result of clandestine receipt of inputs, the same view is required to be taken in regard to shortages also, that the shortages are not the result of any clandestine or unauthorised utilisation of the inputs. The shortages thrown up also do not account for much. The appellants' Management as well as its auditor have accepted the differences between the physical stocks and the procurement as normal and something to be put up with. It is a very small (0.24%) fraction of the inputs received. It is we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction of those automobiles. The manufacture involves use of about 14,000 parts/inputs procured from several hundred suppliers. In an year, several lakh consignments of inputs are received (13.18 lakhs in 2001-2002). The accounting of these parts being a very complex problem the appellant carries this out on their computers. Annual physical check is also carried out. For the years 1999-2000, when the appellant carried out physical stock verification of the inputs, a large variation involving several crores (211) Rupees worth parts was observed. The appellant reconciled this variation and found that shortage worth Rs. 27.67 was not getting reconciled. Similar was the position in respect of excesses worth Rs. 17 crores. The order impugned h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the large volumes leading to non-recording of individual issues of raw materials including components, book balances are not available for comparison with physical balances of these items. However, since the inventory is valued on the basis of physically verified stocks, as explained in Note 4(c) on Schedule 25, the discrepancies have been adjusted in the accounts. 5.6 In our opinion, the valuation of stocks of finished goods, stores, spare parts and raw materials including components has been fair and proper in accordance with the normally accepted accounting principles in India and, read with Note 5 on Schedule 25 regarding change in the method of valuation of inventories to conform to the Accounting Standard-2 issued by the Institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f different varieties of vehicles. It is the submission of the appellants that the exclusion of the parts found in excess while tallying the account is not correct or justifiable at all inasmuch as these parts also form part of the inputs recorded in the appellant's input accounts. 4. The substance of the appellants' submission is that any large organisation has to put up with some discrepancies noticed on stock taking and in the absence of evidence of diversion or mis-utilisation, no demand is justified. In support of this contention, it is being pointed out that the shortages come to a clearly negligible percentage and Tax Authorities also should accept the variation and not raise any demand. It is being submitted that a demand fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have perused the records and considered the submissions made by both sides. The recovery of Modvat credit has been ordered under the impugned order on the basis that the appellant has failed to fully account for the inputs (Rule 57-I). This rule allows recovery of the credits incorrectly or improperly taken. In the present case, there is no allegation that original credit taken was incorrect or improper. The allegation is that, in view of the shortages noticed, the appellant has failed in showing that the inputs on which credit had been taken had been properly disposed of in terms of the Rules. Broadly speaking, the disposals allowed under the Rules are, use in the manufacture of final products, and clearance of inputs after reversal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g into account the excesses noticed. Since there is no evidence, that the excesses are not the result of clandestine receipt of inputs, the same view is required to be taken in regard to shortages also, that the shortages are not the result of any clandestine or unauthorised utilisation of the inputs. The shortages thrown up also do not account for much. The appellants' Management as well as its auditor have accepted the differences between the physical stocks and the procurement as normal and something to be put up with. It is a very small (0.24%) fraction of the inputs received. It is well settled that Tax Authorities also should go by the normal commercial and professional practice. If the shortages are within the tolerance limits fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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