TaxTMI 
TaxTMI 
2004 (6) TMI 155
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.... manufacturer of automobile, its production being around 3.6 lakhs automobiles in 2001-2002. While it pays central excise duty on the automobiles produced and cleared, it is entitled for availing of Modvat credit in respect of inputs (parts, components, consumables, etc.) used in the production of those automobiles. The manufacture involves use of about 14,000 parts/inputs procured from several hundred suppliers. In an year, several lakh consignments of inputs are received (13.18 lakhs in 2001-2002). The accounting of these parts being a very complex problem the appellant carries this out on their computers. Annual physical check is also carried out. For the years 1999-2000, when the appellant carried out physical stock verification of the ....
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....elating to tools with vendors and material with fabricators, confirmations have been obtained. 5.4 In our opinion, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. 5.5 Consequent to the large volumes leading to non-recording of individual issues of raw materials including components, book balances are not available for comparison with physical balances of these items. However, since the inventory is valued on the basis of physically verified stocks, as explained in Note 4(c) on Schedule 25, the discrepancies have been adjusted in the accounts. 5.6 In our opinion, the valuation of stocks of fin....
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.... verification, etc. The appellants also pointed out that, during reconciliation, though the Customs Authorities have accepted many of the shortages as explained and reconciled, a huge quantity of excesses of about Rs. 17 crores remains unreconciled on account of the fact that the shortages and excesses are in respect of parts in respect of different varieties of vehicles. It is the submission of the appellants that the exclusion of the parts found in excess while tallying the account is not correct or justifiable at all inasmuch as these parts also form part of the inputs recorded in the appellant's input accounts. 4. The substance of the appellants' submission is that any large organisation has to put up with some discrepancies ....
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....s in question. The duty demand is only in respect of quantities where the assessee has failed to account for the proper disposal of the inputs, despite chance being given and efforts being made. He has also pointed out that no such dispute has arisen in other major auto companies and that they were all accounting receipts, storage and issues. 6. We have perused the records and considered the submissions made by both sides. The recovery of Modvat credit has been ordered under the impugned order on the basis that the appellant has failed to fully account for the inputs (Rule 57-I). This rule allows recovery of the credits incorrectly or improperly taken. In the present case, there is no allegation that original credit taken was incorrect o....
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....manual tally. The appellants have put in place sophisticated computer based accounting systems to ensure accuracy and efficiency. The evidence on record does not indicate any diversion of inputs in contravention of rules relating to utilisation of inputs. The demand is merely based on the shortages detected during physical tallying, that too without taking into account the excesses noticed. Since there is no evidence, that the excesses are not the result of clandestine receipt of inputs, the same view is required to be taken in regard to shortages also, that the shortages are not the result of any clandestine or unauthorised utilisation of the inputs. The shortages thrown up also do not account for much. The appellants' Management as we....