Excess raw materials without Modvat credit cannot be confiscated, and redemption fine and penalty are unsustainable.

Excess raw materials found during a surprise visit could not be confiscated under Rule 15(1) of the Cenvat Credit Rules where no Modvat credit had been taken and no credit entry had been made. The Tribunal followed earlier decisions holding that non-Modvatable excess inputs are not liable to confiscation, and that redemption fine and penalty are not sustainable on that basis. The confiscation of the seized ingots, together with the redemption fine and penalty, was set aside in favour of the assessee.

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Issues: Whether excess found raw materials, on which no Modvat credit had been taken, could be confiscated and subjected to redemption fine and penalty under Rule 15(1) of the Cenvat Credit Rules.

Analysis: The appellant was found in possession of excess MS ingots during a surprise visit, but had not availed any Modvat credit on those inputs. The Tribunal noted that invocation of Rule 15(1) of the Cenvat Credit Rules was not justified in these circumstances. It also followed earlier decisions holding that excess raw materials which are not Modvatable and in respect of which no credit entry has been made cannot validly be confiscated, and that redemption fine and penalty are not sustainable in such a situation.

Conclusion: The confiscation of the seized ingots, the redemption fine, and the penalty were set aside in favour of the assessee.

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