UNION OF INDIA Vs. HINDUSTAN ZINC LTD

JUDGEMENT

(1.) This appeal by the Revenue under Section 35G of the Central Excise Act, 1944 ('the Act of 1944') is directed against the order dated 20.11.2007 as passed in Excise Appeal No. 466 of 2006-SM(BR) by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi ['the Tribunal'] affirming the order dated 29.11.2005 whereby, the Commissioner (Appeals-II), Jaipur ['the Appellate Commissioner'] set aside the order dated 31.12.2001 as passed by the Adjudicating Authority who had disallowed Modvat/Cenvat credit in relation to the quantity of raw material, which was allegedly received short in the factory and had further ordered recovery of penalty and interest. This appeal has been admitted on the following substantial question of law:-

(2.) After submission of the reply to show cause notice and hearing the assessee, the Adjudicating Authority, in its order dated 31.12.2001 recorded dissatisfaction over the suggestions made by the assessee and while rejecting the assessee's case, disallowed the Modvat credit amounting to Rs. 5,62,417/-, imposed a penalty of equal amount under Section 11AC of the Act, and also ordered recovery of interest under Section 11AB of the Act. The Adjudicating Authority, inter alia, expressed its dissatisfaction in the following:-

(3.) However, in the appeal filed by the assessee, the Appellate Commissioner in his order dated 29.11.2005 referred to a decision of the Tribunal in the case of Hindustan Zinc Ltd. v. COMMISSIONER OF CENTRAL EXCISE, 2004 172 ELT 244 and held that the Adjudicating Authority was not justified in disallowing Modvat/Cenvat credit in relation to the loss on the goods that was about 0.05% during the period in question. The Appellate Commissioner observed and held as under: -