2007 (2) TMI 485 - AT - Central Excise

Tribunal Upheld Duty Demands & Rejected Inputs, Stress on Documentation

The tribunal upheld duty demands for shortages and rejected inputs based on the managing partner's admissions. However, the duty demand related to Modvat ... Demand - Cenvat/Modvat - Inputs - SSI Exemption Issues:1. Shortage of inputs involving Cenvat credit.2. Rejected inputs not used in manufacturing finished goods.3. Availment of Modvat credit during SSI exemption period.Shortage of Inputs Involving Cenvat Credit:The case involved a situation where Central Excise Officers discovered a shortage of inputs during a factory visit, leading to a Cenvat credit discrepancy of Rs. 6,158. The managing partner of the appellants acknowledged the shortage and promptly paid the duty amount. The statement accepting the shortage was not retracted, and it was also admitted that rejected inputs were unsuitable for manufacturing finished goods. The tribunal found no grounds to dispute the duty demand for the short and rejected inputs, given the unchallenged statement by the managing partner.Rejected Inputs Not Used in Manufacturing Finished Goods:Apart from the shortage issue, rejected inputs were found in the production floor that were not utilized in the manufacturing process. The managing partner acknowledged this fact and debited the duty amount related to these rejected inputs. The tribunal upheld the duty demand for these rejected inputs, as they were not used in the production of finished goods, aligning with the admission made by the managing partner.Availment of Modvat Credit During SSI Exemption Period:Regarding the availing of Modvat credit during the SSI exemption period, the Commissioner (Appeals) noted that certain consigned Kraft papers were received by the appellants during the exemption period but accounted for in the register after crossing the exemption limit. However, there was no evidence to suggest that these inputs were consumed during the exemption period. The tribunal observed that the appellants recorded the material in their register after crossing the exemption limit and utilized the inputs in finished goods. Consequently, the demand for duty on the Kraft paper, amounting to Rs. 43,125, was set aside, as the Modvat credit could not be denied solely based on the purchase timing during the exemption period.In conclusion, the judgment addressed the issues of shortage of inputs, rejected inputs, and availing Modvat credit during an SSI exemption period. The tribunal upheld duty demands for the shortage and rejected inputs, based on the managing partner's unchallenged statements. However, the duty demand related to Modvat credit on Kraft paper was set aside due to lack of evidence of consumption during the exemption period, emphasizing the importance of proper documentation and utilization records in tax matters.