Contemporaneous internal records can justify Modvat reversal, but personal penalty needs independent proof of individual involvement.

Contemporaneous internal ISO-9002 records admitted by responsible officials as reflecting actual consumption were preferred over statutory excise records where the assessee could not satisfactorily explain discrepancies, so reversal of Modvat credit was upheld on the facts. The contention that statutory records alone must prevail, or that input-output ratios showed normal consumption, was rejected. Personal penalties under Rule 209A were not sustained because the record contained no independent evidence of the individual appellants' knowledge or culpable involvement; those penalties were set aside.

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Issues: (i) Whether the demand of reversal of Modvat credit was sustainable on the basis of consumption figures reflected in ISO-9002 internal records rather than the statutory excise records. (ii) Whether personal penalties under Rule 209A were sustainable against the individual appellants.

Issue (i): Whether the demand of reversal of Modvat credit was sustainable on the basis of consumption figures reflected in ISO-9002 internal records rather than the statutory excise records.

Analysis: The dispute turned on whether differences between the statutory RG-23A/RT-5 records and the company's internal ISO-9002 registers established that the disputed quantities of inputs had not been used in manufacture. The majority held that the ISO-9002 registers were contemporaneous, maintained by responsible officials, subject to audit, and had been admitted by those officials to reflect actual consumption. In the absence of satisfactory explanation for the differences, the burden shifted to the assessee, which was not discharged. The contention that the statutory records alone must prevail, or that input-output ratios showed normal consumption, was rejected on the facts.

Conclusion: The demand of reversal of Modvat credit was upheld and the main appellant's challenge failed.

Issue (ii): Whether personal penalties under Rule 209A were sustainable against the individual appellants.

Analysis: The record did not contain specific evidence establishing the requisite knowledge or involvement of the individual appellants so as to invoke Rule 209A against them. The majority found that the departmental case rested on the consumption dispute concerning the company's records, but not on independent material showing liability of the personal appellants.

Conclusion: The personal penalties on the individual appellants were set aside.

Final Conclusion: The company's appeal was rejected, while the appeals of the individual appellants succeeded to the extent of removal of personal penalties.

Ratio Decidendi: Where contemporaneous internal records maintained for a certification regime are admitted by responsible officials to reflect actual consumption, and the assessee cannot satisfactorily explain the discrepancy with statutory records, the authority may prefer those records for determining input utilisation; but personal penalty requires independent evidence of the individual's culpable involvement.

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