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2015 (9) TMI 1079 - AT - Central ExciseCENVAT Credit - Credit availed in respect of defective goods - Held that:- When inputs are defective on account of supplier s fault then the same are rejected and sent back to the supplier by reversing the CENVAT Credit. The remaining inputs have to be treated as inputs cleared for manufacture of the finished goods a negligible part of which become damaged during the course of assembly of finished goods. Percentage of such loss is only 0.28 to 0.49% of the total value of the inputs/parts utilized by the appellant. The same is also converted into scrap by the appellant and sold on payment of duty. - So far as demand of ₹ 8,65,408/- is concerned it is observed from the case records that the same pertains to inputs found short. It is also observed that this shortage was as a result of verification undertaken by the Audit of the appellant much before the same was detected by the Revenue. Appellant was thus aware of such shortages and still did not reverse the credit on these shortages until detected by the department. Therefore, extended period will be applicable for the demand of ₹ 8,65,408/- and penalty under Section 11AC of the Central Excise Act, 1944, read with relevant CENVAT Credit Rules, is imposable. However, no option of 25% reduced penalty was extended to the appellant by the Adjudicating authority. - As penalty under Section 11AC of the Central Excise Act, 1944 has been upheld the other penalty of ₹ 5,00,000/- imposed upon the appellant is set aside - Decided partly in favour of assessee.
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