MODVAT exit and stock reconciliation failure sustain duty demand on inputs, semi-processed goods and finished goods.

Duty on stock of inputs, semi-processed goods and finished goods was upheld after the assessee opted out of MODVAT because it failed to produce the declaration made at the time of opting out, and the declared stock did not reconcile with RG-1 records, leaving an unexplained differential quantity. The assessee also could not show that, for semi-processed goods sent for job work, the equivalent duty credit on inputs had been debited or reversed, and it produced no documentary proof of the claimed practice of using modvatable and non-modvatable inputs in equal proportion. On this record, the claim was held unsubstantiated and the demand sustained.

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Issues: Whether the demand of duty on the stock of goods and semi-processed goods was justified after the assessee opted out of MODVAT, despite the alleged 1:1 use of modvatable and non-modvatable inputs and the claim that part of the liability had already been discharged.

Analysis: The assessee could not produce any declaration made at the time of opting out of MODVAT. The declared stock of inputs and finished goods did not match the RG-1 figures, leaving an unexplained differential quantity. The assessee also sent semi-processed goods for job work under challans without producing evidence that the amount equivalent to the credit of duty on the inputs had been debited or reversed. No documentary evidence supported the claimed regular practice of using modvatable and non-modvatable inputs in equal proportion. On this record, the finding that the assessee had not substantiated its claim was upheld.

Conclusion: The duty demand was upheld and the appeal was rejected.

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