NATIONAL ALUMINIUM COMPANY LTD. Vs. CCE

JUDGEMENT

(1.) In this appeal, the challenge has been made by the appellants, to the Order -in -Original dated 28.6.2002 passed by the Commissioner of Central Excise, Bhubaneswar confirming the demand of Rs. 5,66,70,748/ - with equal amount of penalty for the period March 1996 to March 2000 by denying the Modvat credit to them on Caustic Soda Lye (in short CSL) used by them as one of the input in the manufacture of the final product namely, Calcined Alumina on the allegation that the unaccounted loss indicated in the Management Information System (MIS) was nothing but short receipt of CLS in the factory which had never been used/consumed in the process of manufacture of the final product. This impugned order has been passed by the Commissioner in pursuance to the show cause notice served on the appellants for denying them the Modvat credit of the amount in question wherein the imposition of penalty was also proposed and extended period was invoked for having suppressed the true facts and made mis -statements regarding the actual use of the CSL as one of the inputs in the manufacture of final product.

(2.) The basis for issuing the show cause notice had been the cost audit report dated 27.5.2002 given by Shri Ashis Kumar Sengupta who while observing that these has to be some unaccounted loss of Caustic Soda Lye (C.S.L.) in the process of manufacture of final product but the loss noticed by him by conducting the survey, was nothing but short receipt of CSL in the factory which had been camouflaged by labeling the same as 'unaccounted soda loss.'

(3.) The learned Counsel has contested the correctness of the impugned order by contending that no tangible evidence has been brought on record by the Department to prove that the unaccounted Soda loss was nothing but a transit loss taking place before the start of the manufacturing process. This charge has been based merely on assumptions and conjectures. The Cost Audit Report relied upon by the adjudicating authority even did not rule out the loss of CSL during the process of manufacture of final product and did not indicate the short receipt of CSL in the factory of the appellants in clear terms. He has also contended that unaccounted loss of Soda during the manufacture of the final product, even otherwise stands covered under the provisions of Rule 57 -A read with Rule 57 -D(l) and as such, no reversal of the Modvat credit on such loss could be ordered. The Counsel has further argued that the Cost Accountant appointed under Section 14 -AA of the Act had no power to fix the norm, of consumption of CSL and of allowable loss, to take place in the manufacture of final product. Therefore, the observations of the Cost Auditor that normal loss of the CSL would be 4.14 kg/T could not be attached any legal value as he had no power to so observe. The earlier decisions of the Competent Authorities dropping the proceedings against the appellants initiated on these very grounds of having availed the modvat credit on the quantity of CSL which was never received by them in the factory, had been wrongly over -looked by the adjudicating authority. The report of M/s Niranjan and Co. Cost Accountant who carried a special audit of the modvat account of the appellants for the periods 1992 -93, 1994 -95, under Section 14 -AA of the Act, at the instance of the Commissioner of Central Excise, had been wrongly ignored. No extended period of limitation could be invoked in the face of the earlier dropping of the proceedings by the competent authorities, on these very grounds initiated for disallowing the modvat credit on this very input (CSL). The impugned order according to the Counsel deserves to be set aside.