TMI Blog2015 (6) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... e not put to use. Therefore, in terms of Rule 57D of erstwhile Central Excise Rules, 1944, the inputs have become waste during the course of manufacture or used in or in relation not the manufacture of the final product are eligible for modvat credit. - inputs were issued for manufacturing of watches and the same were found defective during the process of manufacture or during the course of Research and Development process which is integral part of the manufacturing process. - when float glass has been put to use and it was found defective, modvat credit cannot be denied. For shortage of inputs, the appellant have explained general ledger of stock adjustment account reflected the shortages of inputs on physical verification. However, in the same general ledgers excesses have also been found over the recorded balances of various inputs. It shows that the inputs have been short accounted in some cases and in some other cases the inputs are in excess, therefore, there is no actual shortage of inputs. The shortages and excesses are due to the fact that stock accounting used to be done on weighment basis since the minute inputs ran into millions and physical counting is not possible. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority with the following terms as under: 5. The appellants had pleaded that the adjudicating authority had not fully understood their record - RDW. Reference has been made to their reply dated 23-6-2000 to the show cause notice. In para A2 it has been submitted as under - Some of these inputs also got damaged during the process of assembly and are thus rendered waste in the process of manufacture. According to the appellants no cognizance had been taken of this submission by the adjudicating authority. Reference had also been made to the discussion by the adjudicating authority wherein while taking note of the fact that the details given in RDW showed that some inputs became defective during handling of such items, no relief has been given even in respect of such watch parts wasted during handling which is a part of the process of manufacture. It has been pleaded before us that if an opportunity is given to the appellants, then they will be able to produce evidence that some of the parts were got wasted during the course of manufacture of watches and to that extent it was pleaded that the demand of duty was not justified. 6. We consider that the provisions of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-2012 (276) ELT 153 (SC), TataEngg Locomotive Co.Ltd.-2010 (256) ELT 56 (Bom). He further submits that there was no shortage of inputs as per general ledger stock of stock adjustment account. The shortages and excesses are due to the fact that stock accounting used to be done on weighment basis since minute inputs ran into millions and physical counting is not possible. He further submits that the appellant has produced reconciliation statement for rejections by production floor and work orders issued by stores with certificate issued by chartered accountant. He, therefore, submits that as the demands are not sustainable consequently, penalty is not imposable on the appellant. 5. On the other hand, learned AR strongly opposed the contention of the learned Counsel and submits that the Commissioner has examined the issue in detail and on the basis of report of rejection of defective work came to the conclusion that these inputs were destroyed before putting into the use. He analysed each and every RDW. Therefore, there is no force in the contention of the learned Counsel for availing credit. Hence, the credit has rightly bee denied to the appellant. He further submits that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 57D of erstwhile Central Excise Rules, 1944, the inputs have become waste during the course of manufacture or used in or in relation not the manufacture of the final product are eligible for modvat credit. In the impugned order, the Commissioner himself observed that the ripping open of manufactured watches also does not appear to be an essential requirement for manufacture this effectively means that the emergence of this waste is either prior or after the manufacturing process. The waste was in the nature of being emanating as a result of Research and Development process which is quite different from manufacturing activity. The said observations of the Commissioner itself is conclusive that the inputs were issued for manufacturing of watches and the same were found defective during the process of manufacture or during the course of Research and Development process which is integral part of the manufacturing process. Further, I find that the similar issue came up before Hon ble High Court of Delhi in the case of Asahi India Safety Glass Ltd. (supra) wherein the High Court has granted the benefit of Rule 57D to the float glass not found defective per se and after being pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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