JUDGMENT

Anil R. Dave, J. —

1. Delay condoned.

2. Leave granted.

3. Being aggrieved by the judgement and order dated 1st July, 2008 delivered in the CEA No. 59/2007 by the High Court of Karnataka at Bangalore, this appeal has been filed by the Revenue.

4. The respondent, a limited company, is a holder of Central Excise Registration and is a manufacturer of data processing machines and is also availing benefits under Modvat Scheme. On 25.10.1996, Superintendent of Central Excise visited the factory premises of the respondent-assessee for verification of the stock of inputs on which Modvat credit was availed. It was noticed that there was a vast difference between physical stocks available and that shown in RG23A Part 1 Register. The Managing Director of the respondent-assessee, in his statement dated 25.10.1996 given before the Superintendent of Central Excise, West Range, Mangalore, admitted that the actual physical stock of inputs and entries in the RG23A Part 1 Register did not tally because the respondent-assessee had removed the Modvatable inputs for sales and warranty replacements. The Managing Director of the respondent-assessee also admitted the discrepancy i.e. shortage i