Contemporaneous records and admissions upheld duty demands, while the penalty was reduced as excessive on the facts.

Modvat credit on alleged Ferro Nickel was sustained for recovery because the assessee did not dispute reversal of the credit already taken. Duty demands on shortage of iron and steel scrap and on stainless steel billets cleared as alloy and non-alloy steel were upheld, the first being supported by a panchnama in the presence of representatives and the second by the assessee's records and the Vice-President's statement linking production, despatch and RG 1 entries. Penalty was found warranted for the established violations, but was reduced as excessive on the facts.

---

---

Issues: (i) whether Modvat credit availed on the alleged Ferro Nickel could be recovered, (ii) whether duty could be demanded on iron and steel scrap found short and on stainless steel billets cleared under the guise of alloy and non-alloy steel, and (iii) whether the penalty imposed under the excise law warranted reduction.

Issue (i): whether Modvat credit availed on the alleged Ferro Nickel could be recovered.

Analysis: The Appellants did not dispute reversal of the credit taken on 76.225 MT of the material described as Ferro Nickel. In such circumstances, the credit reversal and corresponding recovery stood admitted and required no further examination on merits.

Conclusion: The recovery of Modvat credit on this count was sustained.

Issue (ii): whether duty could be demanded on iron and steel scrap found short and on stainless steel billets cleared under the guise of alloy and non-alloy steel.

Analysis: On the scrap shortage, the finding was based on the panchnama prepared in the presence of the Appellants' representatives, and the Appellants failed to establish that the disputed scrap was actually available in the factory. On the stainless steel billets, the demand was supported by the Appellants' own records and the statement of their Vice-President recorded under Section 14 of the Central Excise Act, which linked the production and despatch reports to the RG 1 entries and showed clearance of stainless steel cast billets as alloy and non-alloy steel.

Conclusion: The duty demands on both counts were upheld.

Issue (iii): whether the penalty imposed under the excise law warranted reduction.

Analysis: Although penalty was found imposable in view of the wrongful availment of credit and the other established violations, the quantum imposed was considered excessive in the facts and circumstances. The penalty was therefore scaled down to meet the ends of justice.

Conclusion: The penalty was reduced to Rs. 25 lakhs.

Final Conclusion: The appeal succeeded only to the extent of reduction of penalty, while the duty confirmations and credit reversal were maintained.

Ratio Decidendi: Where the demand is supported by contemporaneous records, admissions of responsible representatives, and a valid panchnama, the appellate forum will sustain the duty demand, but may reduce a penalty found excessive on the facts.

---