ALLADI ROCK DRILLING EQUIPMENTS (P) LTD. Vs. COMMISSIONER

JUDGEMENT

(1.) THE Central Excise Appeal filed under Section 35G of the Central Excise Act, 1944 (for short the Act) arises out of the order dated 08.04.2005 in Appeal No.E/52/02 passed by the Customs, Excise and Service Tax Appellate Tribunal (for brevity CESTAT), South Zonal Tribunal, Bangalore.

(2.) ADMITTED facts of the case are that the appellant is a manufacturer of DTH hammers, button bits and other parts of boring machinery falling under Chapter Heading 84 & 82 of the Central Excise Tariff Act. On 21.09.1996, excise officials conducted a surprise check on the premises of the appellant -company and found shortage of 24,360 numbers of Tungsten Carbide buttons, an input, which is used in the manufacture of drill bits. During the inspection, panchanama was also drawn wherein it is recorded that on verification of the records and on physical verification of the finished and unfinished goods lying in the factory premises, there was shortage of 24,360 T.C. buttons apart from other finished goods. It is also recorded in the panchanama that an approximate quantity of 10.115 MTs. steel scrap (no verification by weighing was carried out) was found lying in the factory premises. On the same day, statement of one E.Rambabu who is the Office Assistant and In -charge of maintenance of Central Excise records, was also recorded, wherein he had explained reasons for shortage of 24,360 numbers of T.C. bits. His statement reads as under:

(3.) THE sum and substance of the above quoted statement is to the effect that as a matter of practice, utilization of the T.C. buttons is tallied only with the final utilization of the buttons in the final product at the time of its removal on payment of excise duty and there is no inventory management being done by the appellant. This was the consistent stand of the appellant all through before the authorities below. On a notice issued to the appellant directing it to show cause as to why the Modvat Credit was availed shall not be withdrawn on input i.e. T.C. buttons which was found to be in shortage and why penalty proceedings should not be initiated, a detailed explanation was submitted explaining the process of manufacture and the manner in which T.C. buttons were used and how certain amount of wastage occurs in the process of manufacture. Along with the reply to the show cause notice, sworn affidavits of Y.Krishna Murthy, Quality Control Supervisor, and Sri K.Babu, Excise Assistant and Sri K.V. Naga babu, Production Supervisor were also filed. Further, in the reply dated 30.05.1997, a categorical assertion was made that the scrap of approximately 10.115 MTs. of spoilt button bits in which T.C. bits in one form or the other embedded, etc. was lying in the premises and the Deputy Commissioner to whom explanation was submitted was requested to visit the factory for factual verification of the statements. Being not satisfied with the explanation submitted by the appellant, the Assistant Commissioner passed an order dated 21.08.1997 and the same was confirmed by the Commissioner and also by the Tribunal. In the final analysis, the result of the orders passed by the respective authorities is to the effect of denial of Modvat Credit on the input to the extent of shortage of 24,360 numbers of T.C. bits. In the above stated facts, the appellant preferred the present appeal. Three substantial questions of law are said to be arising from the orders of the Tribunal for adjudication are raised: