TaxTMI 
TaxTMI 
2015 (9) TMI 1079
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....admissible CENVAT Credit, alongwith interest. Penalties were also imposed upon the appellant under Section 11AC of the Central Excise Act, 1944; read with Rule 57AH(2) of the Central Excise Rules, 1944 & Rule 13(2) of the CENVAT Credit Rules, 2001/2002 and Rule 173Q of Central Excise Rules, 1944 & Rule 13(1) of Central Excise Rules, 1001/2002. 2. Shri Ravi Raghavan (Advocate) appearing on behalf of the appellant argued that the period of demand is from 2000-01 to March 2005 and pertain to four show cause notices dt.26.4.2005, 6.5.2005, 8.7.2005 & 2.8.2005. That out of total demand of Rs. 1,17,53,861/- an amount of Rs. 8,65,408/- is demanded for the inputs found short during physical verification of stock which was reversed by the appellant....
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....galore-I v. Geltec Ltd. [2012 (281) ELT 170 (Kar.) affirmed by Apex Court as reported at [2014-(304) ELT A-85 (SC)] (iii) Monika Electronics Ltd. v. CCE, Delhi [2006 (204) ELT 468 (Tri.)] affirmed by Allahabad High Court 2013 (293) ELT A-26 (All)] iv) CBEC Circular F.No.B-4/7/200-TRU dt.03.04.2000. 2.1 Learned Advocate further argued that the fact of scrap emerging during the manufacturing process and the clearance of such scrap on payment of duty was brought to the notice of the Adjudicating authority but the same has been conveniently avoided when this fact is not otherwise disputed in the Adjudication order. He made the Bench go through para-11 (iii), (iv) & (v) of the Order-in-Original dated 30.09.2005 passed by the Adjudicating auth....
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....perused the case records. Major amount of demand of Rs. 1,08,88,453/- pertain to CENVAT Credit availed by the appellant with respect to inputs which according to appellant were found defective or got damaged during the course of assembly of the finished goods manufactured by the appellants. Adjudicating authority has gone by the logic that inputs are known to be defective on receipt and cannot be taken to have been used in the manufacture of the appellants. Appellant has taken following arguments before the Adjudicating authority, as per para 11(iii), (iv) & (v) of the Order-in-Original dated 30.09.2005, which are reproduced below:- "(iii) The manufacturing process of their plant is as under : The manufacturing of engines consists of as....
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....ity that when inputs are defective on account of supplier s fault then the same are rejected and sent back to the supplier by reversing the CENVAT Credit. The remaining inputs have to be treated as inputs cleared for manufacture of the finished goods a negligible part of which become damaged during the course of assembly of finished goods. Percentage of such loss is only 0.28 to 0.49% of the total value of the inputs/parts utilized by the appellant. The same is also converted into scrap by the appellant and sold on payment of duty. 4.2 Appellant has relied upon the case of Asahi India Safety Glass Ltd. vs. UOI (supra) affirmed by Hon ble Supreme Court. Paras 29 to 31 are relevant and are reproduced below:- "29. As indicated earlier, when....
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.... that the sheet was not used in the manufacture of safety glass. It is at this juncture again we emphasise that sub-rule (4) of Rule 57A points out that credit is to be allowed on inputs used in the final product and all inputs used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in the final product or not the department cannot deny credit of specified duty or even can vary on the ground that part of the inputs contained in any waste, refuse or by-product arising during the manufacture of final product or when the inputs have become waste during the course of manufacture of the final product whether or not such waste or refuse or by-product is exempt from the whole of the dut....
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.... demand of Rs. 1,08,88,453/- is allowed on merits as well as on time bar. 5. So far as demand of Rs. 8,65,408/- is concerned it is observed from the case records that the same pertains to inputs found short. It is also observed that this shortage was as a result of verification undertaken by the Audit of the appellant much before the same was detected by the Revenue. Appellant was thus aware of such shortages and still did not reverse the credit on these shortages until detected by the department. Therefore, extended period will be applicable for the demand of Rs. 8,65,408/- and penalty under Section 11AC of the Central Excise Act, 1944, read with relevant CENVAT Credit Rules, is imposable. However, no option of 25% reduced penalty was ext....