Full Judgment
2. The brief facts of the case are that the appellants are engaged in the manufacture of CI castings. On 27.10.98 the officer of Revenue visited the factory of the appellant and during verification of the stock, it was found that there was excess stock of finished goods and there was also shortage of some of finished goods compared with the recorded balance in RG-I register. The goods found in excess, the adjudicating authority confiscated the same and in respect of the goods found short the demand was confirmed. Some amount of Modvat credit was also denied on the ground that the capital goods on which the credit was taken are not covered under the definition of capital goods. The goods, which were confiscated, were allowed to be redeemed on payment of a fine of Rs. one lakh and penalties imposed on the appellant.
3. The contention of the appellant is that the entry of production in RG-1 register was made without any physical counting. The goods are small pieces of the castings and on the basis of cavities of the moulds used on one heat the entries were made in RG-1. Sometimes some cavities of the mould remain empty but the entry of production is made on the basis of cavities in the mould used. In the situation the variation in stock is bound to occur over which the appellant has no control. The contention of the appellant is also that excess goods were found in factory and there was no intention in (sic) their part to remove the goods without payment of duty. In respect of denial of credit, the contention is that the goods in question are CI castings for replacement of the parts of their plant and machinery and these are used as parts of the machinery, therefore, they are eligible for the credit.
4. The contention of the Revenue is that the capital goods are in the form of CI castings which are classifiable under Chapter 73 of Central Excise Tariff and the goods falling under Chapter 73 are not eligible for the benefit of credit as capital goods. In respect of excess and shortage, the contention of the Revenue is that the appellants are not disputing that there was excess or shortage on the finished goods, therefore, there is no infirmity in the impugned order.
5. In this case the appellants are not disputing the fact regarding excess and shortage of the goods. In these circumstances, we find no infirmity in the impugned order whereby excess goods were confiscated and duty was demanded in respect of the goods found short. In respect of the eligibility of capital goods in respect of the credit as the goods are classifiable under Chapter 73 and these are castings, therefore, the appellants are not entitled for the credit as capital goods from these goods. However, taking into the facts and circumstances of the case the RF reduced to Rs. 40,000 and penalty is reduced to Rs. 15,000 otherwise the impugned order is upheld.