Full Judgment
The penalty of Rs. 35,000 was also imposed on the appellants.
2. The appellants are not contesting the confiscation of the goods found in excess in the factory. The appellants are only contesting denial of modvat credit on the goods found short.
4. The appellants are engaged in the manufacture of textile fabrics laminated with PU foam and were taking modvat credit in respect of duty paid on PU foam. On 6.1.2000 the factory premises of the appellants was visited by the officers of Central Excise, it was found that PU foam on which the credit was taken was found short as compared to their statutory records. Shri Sandeep Behl, authorised signatory of the appellants stated that PU foam being bulky and inflammable in nature hence stored in the open space available adjacent to the factory. A show cause notice issued to the appellants for denying the modvat credit in respect of the goods not found in the factory and the adjudicating authority denied the credited and imposed the penalty.
5. The contention of the appellants is that PU foam was available in the open space near the manufacturing hall, the appellants produced a copy of plan which was submitted alongwith the application for registration which shows some open space near to the manufacturing hall. The contention of the appellants is that on pointing out by the authorised signatory that the goods are lying near the manufacturing hall, the Revenue is not denying this fact that the goods were not available thereto, therefore, they are entitled to take modvat credit.
6. The contention of the Revenue is that the goods were not found in the factory and the statement of Shri Sandeep Behl was that the goods were lying outside the factory. As the duty paid goods were found short, therefore, the appellants are not entitled to take modvat credit. The Revenue also submitted that site plan was not submitted before the lower authorities.
7. In this case, the benefit of modvat credit was denied in respect of goods found stored near to the factory in the open space. The statement Shri Sandeep Behl specifically mentioned that these goods are stored in the factory near to the manufacturing hall. There is no finding that the goods were not found there. The appellants mentioned that it was their practice that they were keeping PU foam in the open space, as in the manufacturing hall, the machines being run by gas flame when the process of laminating being undertaken, therefore, PU foam is stored in the open space.
8. In view of the fact that there is no finding that the goods were not stored in the open space which disclosed by the appellants, denial of modvat credit on this ground is not sustainable. Therefore, order denying the credit is set aside. However, the appellants stored the goods in the open space without seeking permission, therefore, they are liable for penal action. Therefore, on this ground the imposition of penalty is upheld. The appeal is disposed of as indicated above.