HIPOLIN LTD. Vs. COMMISSIONER OF C. EX., AHMEDABAD

JUDGEMENT

(1.) THE appellant is engaged in the manufacture of detergent powder and cake falling under Chapter 34 of the first schedule of Central Excise Tariff Act, 1985. During the course of audit of the records of the assessee the Cenvat credit to the duty payment ratio was verified to assess the availment of cenvat credit. On verification it was found that the assessee has been following the batch wise/lot wise production process. During the batch wise/lot wise manufacturing process, the liquid raw material like LAB, Sulphuric Acid, water etc. involved in the process of manufacture are transferred through pipes with the help of pumps/electricity to the vessel/missing vessel for the manufacture of Synthetic Detergent Powder and/or Cakes. After a batch is manufactured and packed in wrapping paper, the assessee was deducting the consumption of inputs from their stock of inputs, as per their formula (called the BILL OF MATERIAL MASTER). The assessee was also sending their inputs (raw material) like LAB for the manufacture of acid slurry which is used in the manufacture of goods, viz; Detergent Powder & Cake for job work. During the scrutiny of the assessees records, it was observed that the assessee was showing large quantity of inputs as damaged or as shortage, some of which were shown as shortage/damaged even in job work. The assessee was not able to explain before the officers of the audit as to where and how the shortage or damage of raw materials during the manufacturing process happened but the assessee had reduced the involved quantity of inputs so damaged or found short, from their inventory/stock by showing as having been used in the manufacture of final products and have not reversed the proportionate cenvat credit on the damaged/shortage inputs.

(2.) ON being asked, the assessee vide their letter dated 5 -7 -2007, stated that the words shortage/damaged were wrongly/casually mentioned in their raw materials and packing materials stock statement from 1 -8 -2004 to 31 -10 -2006; that it was informed to the audit party at the time of audit that the figures shown against shortage/damage did not pertain to any shortage/damage, but in fact, it represented process loss. This loss occurred during various stages of manufacture of final products. The assessee also furnished the details for the year 2004 -05 to 2006 -07, duly signed and verified by the Range Superintendent.

(3.) IN view of the above, proceedings were initiated against the appellants by way of issuance of show cause notice dated 29 -5 -2008 proposing to confirm demand of duty of Rs. 3,57,106/ - by dis -allowing the modvat credit wrongly availed by the appellants from August 2004 to October 2006. The notice also proposed confirmation of interest and imposition of penalty. The said notice resulted in passing an order by the original adjudicating authority confirming demand of duty along with interest and imposing penalty of identical amount under Section 11AC of the Central Excise Act. The said order of original adjudicating authority was upheld by Commissioner (Appeal), hence the present appeal.