2001 (8) TMI 668 - AT - Central Excise

Confiscation upheld for zinc scrap & alloy due to record-keeping failures; Modvat credit denied

The judgment upheld the confiscation of zinc scrap and excess zinc alloy due to record-keeping failures, with a nominal fine imposed for the zinc scrap ... Modvat on inputs - Deemed credit Issues: Liability to confiscation of zinc scrap, excess zinc alloy confiscation, Modvat credit entitlementIssue 1: Liability to confiscation of zinc scrapThe appellant, a carburettor manufacturer, faced confiscation of zinc scrap worth Rs. 2.73 lakhs due to failure to maintain proper accounts during the carburettor manufacturing process. The Commissioner imposed a nominal fine of Rs. 1,000 recognizing the non-wilful nature of the failure, which was not contested by the appellant. The fine was deemed appropriate and did not warrant interference.Issue 2: Excess zinc alloy confiscationDuring an inspection, officers discovered a shortage of 4532 kilograms of zinc and an excess of 4713.6 kilograms of zinc alloy in the appellant's factory. The Commissioner ordered the confiscation of the excess zinc alloy. The appellant's explanation that the excess was due to zinc adhering to the crucible was deemed unacceptable. The appellant's attempt to justify the excess based on the quantity of aluminium used was rejected as the excess zinc alloy was considered a new commodity requiring entry in statutory records. The failure to record the zinc alloy justified its confiscation.Issue 3: Modvat credit entitlementThe appellant sent zinc to a job worker for alloying, receiving back an alloy equal in weight to the zinc sent, with 3% less zinc due to the presence of aluminium. The appellant claimed Modvat credit on the entire quantity received, including the 3% zinc retained by the job worker. The Commissioner found the appellant took excess credit and was not entitled to credit on the zinc retained by the job worker. The appellant's argument for deemed Modvat credit on the aluminium used by the job worker was rejected as the appellant did not supply or have knowledge of the aluminium used in the alloying process. The appellant's lack of involvement in the supply of aluminium precluded entitlement to deemed Modvat credit, leading to the dismissal of the appeal.In conclusion, the judgment upheld the confiscation of zinc scrap and excess zinc alloy due to record-keeping failures and the denial of Modvat credit on zinc retained by the job worker. The appellant's arguments regarding deemed Modvat credit on aluminium were refuted, resulting in the dismissal of the appeal.