WIN PIPES Vs. COMMISSIONER OF CENTRAL EXCISE, COCHIN

JUDGEMENT

(1.) THIS appeal arises from OIA No. 571/2002 -C.E., dated 27 -11 -2002. The Revenue was in appeal before the Commissioner (Appeals) under Section 35E(2) of C.E. Act against OIO No. 7/2000, dated 7 -3 -2000 dropping the demands in the Show Cause Notice. The main allegations in the Show Cause Notice were that the assessee did not have sufficient balance in PLA at the time of clearance on 3 -12 -98 to cover the duty liability of the goods cleared and that they had availed ineligible Modvat credit on inputs, which were not used in the manufacture of the final product. The extent of Modvat credit availed on inputs, which were found to be not available and not used in the manufacture of final product, was to an extent of 11,437 kgs of PVC Resin and 2,010 Kgs. of Calcium carbonate. The statement of one Mr. B. Iqbal was recorded by the investigating officer and in his statement dated 3 -12 -1998 he had deposed that the raw materials short noticed were used for manufacture of PVC Pipes and they did not have any account of such manufacture and clearance. Mr. B.P. Mohammad Ali, who is the POA holder and in charge of day -to -day affairs of the Company, was also examined. In his statement, Mohammad Ali stated that the raw materials are of very fine powders and there is a chance of loss due to scattering of the powder in the air at the time of handling, mixing, transporting etc. He admitted that there was no regular physical verification of raw materials done by him. The statement of Shri B. Iqbal was shown to him wherein B. Iqbal admitted about manufacture of PVC Pipes and clearing the same without accounting and paying entire duty for the quantity of raw materials found short. He was willing to reverse the Modvat credit availed on the quantity of raw materials short noticed. The Additional Commissioner, in the OIO, accepted the partys plea that the shortages could have occurred as a scattering of the powder while handling, mixing, transporting. However, on appeal by Revenue, the Commissioner (A), after examining both the sides, did not accept the findings and held that the assessee did not have stock of waste and sweepings nor maintained the accounts of the quantum of shortage of inputs that would have occurred in the form of spillages, fly off during handling or as waste arising due to power failure during the process of manufacture. He has held that the loss of inputs has occurred prior to manufacture and not covered under Rule 57D. He has held that no credit is admissible in respect of inputs lost due to spillages, damages, fly off, etc. prior to manufacture as held by the Tribunal in the cases of Monica Electronics Ltd. and Guljag Chemicals Pvt. Ltd. - 1995 (75) E.L.T. 440 and 1996 (87) E.L.T. 292.

(2.) THE learned Counsel submits that the loss of the inputs have taken place during the course of manufacture and, therefore, they are eligible to claim the benefit of Rule 57D. He relies on the rulings of the Tribunal rendered in the following cases :

(3.) THE learned JDR points out to the statements of Iqbal and Mohammad Ali who have clearly admitted about the manufacture and clearance of goods without payment of duty. He also submits that Mohammad Ali had merely presumed that there was a chance of spillage in the air while transporting the goods. The statement is not categorical and not supported by any evidence. Even otherwise, it was prior to manufacture and benefit is not available. He relies on the following two judgments : -