ORDER
K.C. Mamgain, Member (T)
1. Heard both sides in the matter.
2. Shri Rajesh Chander Kumar, learned Advocate appearing for the appellants pleaded that he is contesting the denial of credit of Rs. 16,27,814.50 to the appellants under Rule 57H of the Central Excise Rules, 1944 on material in process. He stated that the Asst. Collector of Central Excise, by his letter dated 15.4.94, allowed a credit of Rs. 51,74,193.38 to the appellants under Rule 57H of the Act. However, he made it clear that the above permission is based on the record produced by the appellants, but if it is established on further investigation that the substantiating or corroborating documents were not exactly contemporaneous to the claim made, it shall be automatically deemed to be wilful mis-statement of facts and suppression of material evidence. Subsequently, the Superintendent of the Central Excise, Range ‘A’ Dharwad, verified the documents and he noted several discrepancies. Accordingly, a show cause notice was issued to the appellants denying the credit of Rs. 33,72,827.49. The show cause notice was adjudicated by the Dy. Commissioner under his Order-in-Original No. 79/99 (Dy. Commr.) dated 29.10.99 wherein he dropped the demand of Rs. 17,45,013, but confirmed demand of Rs. 16,27,814.50 on the ground that the statement initially given to the Asst. Commissioner on 22.3.94 does not indicate the actual stock lying in the process of the factory floor in each department/section. It is the responsibility of the factory owner to substantiate the process stock and the claim made for the duty credit as on 21.3.94. There was fire in the floor of the factory in November 93 and the stock of such goods burnt/damaged has not been substantiated, so as to debit or minus such process stock from the claimed process stock. The appeal filed against the Order of the Deputy Commissioner was rejected by the Commissioner (Appeals) on the ground that it is only on 6.10.99, after more than 5 & 1/2 years the appellant had submitted the stock lying in various section/department of the factory in respect of each category of staple fibre. It is not possible to either go into the veracity of the claim made or give any decision on the position of the stock lying in the factory. Since the appellants have not satisfied the Asst. Commissioner about the inputs in process, consequent to their opting for Modvat, which is a pre-requisite for allowing credit, the correct position cannot be ascertained now.
3. The learned Counsel pleaded that the appellants filed declaration on 22.3.94 with the Asst. Collector seeking permission under Rule 57H of the Central Excise Rules, 1944 for availment of Modvat credit of Rs. 56,72,878 in respect of the input used in the final products, furnishing required details inputs-wise as on 21.3.94, setting out the Gate Passes numbers with dates, quantity and duty paid on the inputs that were lying in the Godown. The credit of Rs. 16,27,814.50 claimed on 117845 kgs. of staple fibres under process was denied by the Appellate Authority holding that the appellants have failed to clearly substantiate the actual process stock with the documentary evidence. The finding of the Appellate Authority that there was fire in the factory during November 93 has not been fully explained is irrelevant in the present proceedings as question here is with respect of the goods as held in March 94. The said stock has been duly substantiated with the records such as stock statement dated 25.3.94 submitted to the Bankers, under letter dated 10.4.94. He also stated that the Appellate Authority has also not considered the Chartered Accountant’s Certificate about the stock position on 23.9.94. He relied on the decision in case of Mastan Tin Ltd. v. CCE, Mumbai-III, 2002 (141) ELT 381 (Tri.-Mum) and in case of CCE, Bhopal v. Sinter Plast Containers (P) Ltd., 2000 (121) ELT 570 (Commr. Appl). He stated that even though the appellants were not maintaining records for any process material lying in different sections, however, the same can be considered on the basis of stock statement given to the Bankers and declaration made by them.
4. Shri L. Narasimha Murthy, learned, SDR appearing for the Revenue stated that the appellants have filed declaration under Rule 57H for the inputs lying in process and finished goods as on 21.3.94. However, when this was verified, it was found that there was no record maintained for the input in process. The credit for others was allowed to the appellants. But for the input in process, in the absence of any evidence, it was not allowed. He also stated the stock statement which is now produced covers the Gate Passes from March 1993 till March 1994. The Bank statement submitted by the appellants is neither authenticated nor signed by anybody nor any receipt by the Bank is available. Therefore, its veracity is doubtful. The Chartered Accountant’s Certificate as claimed to have verified the copy of the stock position as on 25.3.94, submitted to the Bank of Mysore is dated 25.11.2002, signed by Shri S.P. Pagad. Thus, it appears to be fabricated as on 25.11.2002, one cannot verify stock of 25.3.94. He has stated that there was fire in the factory of the appellants and damaged stock was also in process which has been never quantified by the appellants and most of the Gate Passes on which they are relying for credit under Rule 57H are for the period prior to November 1993. Hence, it becomes relevant to ascertain correct stock position. Only in 1999, after 5&1/2 years they had given stock position before the Original Authority in different sections which was as on 28.2.94 without any correlation with duty paying documents. Therefore, in the absence of any authentic and correct information or any correct record by which stock position in process could be known, the lower authority has correctly denied the benefit to the appellants. He also stated that the decision relied upon by the appellants are not applicable as in this case, as the position cannot be ascertained from the input receipt documents since there was fire in the factory and process material was damaged or burnt and for this no exact quantity or evidence is available with the appellants.
5. We have carefully considered the submissions made by both the sides. We find that the appellants have been denied credit claimed for in process material on the ground that they were neither maintaining any record in each section/department where the process material was lying nor they could establish with the duty paying documents that the said declared quantity is covered by proper duty paying documents. We find that on 21.3.94, when the appellants had declared the stock on opting for Modvat scheme, they had not separately shown any quantity in any process material. When that declaration was verified, then after verification of the duty paying documents, credit was allowed to them which was covered by proper documents. The credit in dispute was denied on the ground that neither it can be linked with any duty paying documents nor there was any stock of inputs material in-process shown separately. The appellants have accepted before the Original Authority in response to the show cause notice that they were not maintaining any record as it is not possible to take exact quantity of in-process stock every day. However, the system is to take physical verification on monthly basis. They have taken stock on 28.2.94 and 25.3.94 and the difference was submitted to their Bank. We find that the claim that have been submitted to their Bankers shows a quantity 64205 kgs. of raw material in process as on 25.3.94 whereas it was claimed before the lower authority that a quantity of 117845 kgs. of raw material was in process as on 21.3.94. We also find that they could not correlate the duty paying documents with the quantity said to be in process.
Therefore, the Deputy. Commissioner was not satisfied that they were eligible for credit for this input in process material. We find that the Commissioner (Appeals) has correctly observed that it is not possible to either go into the veracity of the claim made or give any decision on the position of the stock lying in the factory as the appellants have not satisfied the Asst. Commissioner about the inputs under process, consequent to their opting for Modvat, which is a pre-requisite for allowing credit. It is the responsibility of the appellants to substantiate the process stock. In the absence of any record, it is not possible to connect the stock with duty paying documents as the appellants are claiming credit on that stock of input for which the duty paying documents are lying with them since March 93 till March 94. Since there was fire in November 93 and thereafter the appellants could not quantify the material that was destroyed or was lying as damaged, therefore it is not at all possible to find out correct quantity in process on 21.3.94. Since the appellants have failed to substantiate their claim, therefore, the appellants are not eligible for the benefit. The decisions relied upon by them is not helpful to them as in that case it was possible to arrive at some quantity and correlate with the duty paying documents but in the present case it is not possible to do so. The veracity of the Chartered Accountant’s Certificate is not established as the Chartered Accountant’s Certificate is dated 25.11.2002 certifying the stock position on 25.3.94 shown in Bank Statement and submitted to the Bank on 30.4.94. Bank Statement submitted to the Bankers is uncertified and unsigned. This is otherwise not relevant as stock position including in-process material (though not shown separately as on 21.3.94) was considered and credit was allowed by lower authorities where duty paying documents were correlated. Therefore, we do not find any merit in the appeal and the same is rejected.