- (1.) The revenue has filed the instant appeal under Section 35G of the Central Excise Act, 1944 (for brevity, the Act'), challenging order dated 6-11-2006, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity, the Tribunal'), claiming that the following questions of law would arise for determination of this Court:- "(i Whether the respondent was entitled to Modvat credit of S.S. Sheets as Scrap after receipt of required width from the supplier? (ii Whether the respondent is entitled to benefit of Rule 57-D of clearance of modvatable inputs ? (ii Whether the respondent is entitled to Modvat credit on S.S. Sheets which were received as per their requirement and were removed as scrap without being used as inputs in the manufacture of final product? (iv Whether the Modvat credit of Rs. 36,343/- and Rs. 476/- on inputs found short is deniable and recoverable under Rule 57(1) of the Central Excise Rules, 1944? (v) Whether the Tribunal was justified in reducing the penalty while upholding the majority of the order passed by the adjudicating authority?
(2.) Brief facts of the case are that the assessee-company is engaged in the manufacture of Washing Machines falling under Chapter Heading 8450 of the Central Excise Tariff Act, 1985 (for brevity, the Tariff Act'). On 24-11-1998, in the presence of Shri A.K. Rai, authorized signatory of the assessee-company, the factory premises was inspected by the officers of the Central Excise, Division-I, Gurgaon, and statutory records and other relevant records were checked/verified by them. It was noticed that there were variance in the physical and book stock of finished goods, clearances of Modvat credit availed inputs and removal of Modvat credit availed inputs at a lower value. Un- accounted finished goods and records were seized. Thereafter a show cause notice was issued proposing to confiscate the seized goods, raising demand of duty as well as for imposition of penalty. The assessee-company took the stand that the seized goods were day's production and duty has been paid correctly on the Modvat inputs as they were scrapped and there was no clandestine removal of any goods. The Adjudicating Authority vide order- in-original dated 24-11-1999, confirmed the demand, confiscated the seized goods with an option to redeem the goods on payment of redemption fine and also imposed penalty.
(3.) Feeling aggrieved, the assessee-company preferred an appeal, which was dismissed by the Commissioner (Appeals), vide order dated 19-5-2004, upholding the order of the Adjudicating Authority. The assessee-company then filed further appeal before the Tribunal, which has been allowed vide order dated 6-11-2006, subject-matter of present appeal. While referring to the statement of the authorized signatory of the assessee-company, recorded under Section 14 of the Act, the Tribunal has observed as under :- "The lower authorities have not produced any contrary evidence that would indicate that cleared SS Sheet were not scrap. The authorized signatory categorically stated that these sheets were rejected after shearing i.e. after the same were issued and put to use in the shop floor. If that be so, then the demand of duty on this count is unsustainable inasmuch that is settled law that the scrapped items do not fetch the same value as that of new one. In view of the facts and circumstances, the demand of duty on this count is unsustainable and is (thus?) impugned order is liable to be set (aside?) to that extent.";