2007 (9) TMI 476 - AT - Central Excise

Tribunal Upholds Denial of Modvat Credit & Duty Demands, Stresses Documentation

The Tribunal upheld the denial of Modvat credit and duty demands for shortages and clandestine removal, emphasizing the importance of proper documentation ... Demand and penalty - Clandestine removal Issues:1. Modvat credit availed by the appellant in respect of input found short.2. Duty demand for clandestinely removed goods.3. Interpretation of Rule 3(4) of the Cenvat Credit Rules, 2002.4. Admissibility of photocopies of affidavits as evidence.5. Denial of Modvat credit and imposition of personal penalty.6. Assessment of value for clandestinely removed goods.Analysis:1. The appellant, engaged in manufacturing Diesel Oil Engines, availed Modvat credit for various inputs. Central Excise officers found shortages in raw material for which Modvat credit was claimed. Shortages were also identified in the final product. The adjudicating authority confirmed the Modvat credit availed along with personal penalty under Section 11AC for the shortages and duty demand for clandestinely removed goods.2. The appellant did not dispute the findings but argued that duty payment should be based on the assessable value of the input as per Rule 3(4) of the Cenvat Credit Rules, 2002. They claimed the goods were sold at lower prices due to defects, supported by affidavits. However, the Commissioner noted that the goods were removed clandestinely without invoices, and the affidavits were not considered as evidence due to lack of verification.3. Rule 3(4) requires inputs with CENVAT credit to be removed under an invoice. The Commissioner found the rule inapplicable as goods were removed without invoices. Lack of commercial invoices and failure to establish the correct assessable value led to the denial of Modvat credit and imposition of personal penalty.4. The appellant's argument that the value of clandestinely removed goods should be lower due to defects was rejected. The absence of invoices and reliance on unverified affidavits did not substantiate the claim. The adjudicating authority's decision to confirm the duty demand and penalty for clandestine removal was upheld.5. The appellant failed to provide sufficient evidence to support their claims, leading to the rejection of the appeal. The Tribunal agreed with the adjudicating authority's decisions on denying Modvat credit and confirming duty demands for shortages and clandestine removal, along with imposing personal penalties.In conclusion, the Tribunal upheld the denial of Modvat credit and duty demands for shortages and clandestine removal, emphasizing the importance of proper documentation and verified evidence in such cases.