COMMR. OF CENTRAL EXCISE Vs. HINDUSTAN ZINC LTD.

JUDGEMENT

(1.) THIS appeal is filed under Section 35G of the Central Excise Act, 1944 by the Revenue challenging the Final Order Nos. 771 -774/2004, dated 27 -5 -2004 in Appeal Nos. E/71/2000 and E/758 -760/2003 [2004 (172) E.L.T. 244 (Tri. - Bang.)] reversing the Orders -in -Original Nos. 2 to 4/03 -04 (RP), dated 30 -4 -2003 and Order -in -Original No. 20/99 -ASR, dated 18 -10 -1999 of the Commissioner of Central Excise and Customs, Visakhapatnam -I Commissionerate, Port Area, Visakhapatnam. The respondent is a company manufacturing zinc ingots, lead ingots, sulphuric acid, cadmium etc. It receives zinc concentrate and lead concentrate from different sources. On 6 -8 -1996, it filed declaration under Rule 57G of the Central Excise Rules, 1944 to avail Modvat credit of duty paid on zinc concentrates and lead concentrates and thereafter it was availing credit under Rule 57AA on the inputs zinc/lead concentrates.

(2.) THE Revenue officials allegedly noticed shortage of Zinc/Lead concentrates when compared to book balances of material stores record during the course of their annual physical verification of stocks in the factory premises of the respondent; that the respondent was receiving Zinc/Lead concentrates from their mines; in the invoices received from their mines it was observed that dry weight alone was mentioned and valuation of material was done only in terms of dry weight; it was accounting for the same quantity of inputs as mentioned in their invoices in their material stores records as well as in Rule 57AE registers; on receipt of inputs, they were analyzed in their lab for estimating the moisture contained; after analyzing the moisture content, the actual dry weight of the inputs should have been arrived at and accounted for in the relevant registers; that the assessee accounted for the quantities mentioned in the invoices and also availed Modvat credit as mentioned in the invoices; it should have accounted for the actual quantity of input received basing on the analysis of moisture content and proportionate Modvat credit only should have been availed; by not doing so, the assessee had irregularly availed Modvat credit on the quantity of inputs found short at the time of physical verification; it is required to reverse such credit in terms of sub -rule (1) of Rule 57AH of the Central Excise Rules, 1944 read with Rule 12 of the Cenvat Credit Rules, 2001; the assessee's contention that losses were due to natural causes is not tenable; it had not informed about shortage of input noticed at the time of physical verification of stocks to the department and thus suppressed information; by suppressing the information, it had utilized the Modvat credit irregularly and intentionally evaded payment of duty.

(3.) AFTER receiving the reply of the respondent, Orders -in -Original Nos. 20/1999 -ASR, dated 18 -10 -1999 and 2 to 4/03 -04 (RP), dated 30 -4 -2003 were passed by the appellant confirming the levy of duty of Rs. 54,70,576/ - and a penalty of Rs. 33,70,041/ - along with interest. He held that the respondent had failed to account for the shortage noticed in respect of Zinc and Lead concentrates in question at the time of their annual stock verification and the facts and circumstances of the case prove beyond doubt that the shortage noticed was not used in or in relation to the manufacture of its final products.