Judgment:
1. The captioned two appeals pertain to denial of Modvat credit on inputs supplied by M/s. IPCL. The appellants are engaged in the manufacture of polythene film. They purchased granules from M/s. IPCL.
While scrutinizing the RT-12 Return submitted by the appellants, the Department found certain deficiencies and irregularities and issued two show cause notices to the Appellants. Both the show case notices were adjudicated by common order passed by the Additional Collector confirming the demand of Rs. 5,10,270.35 and a penalty of Rs. 12.00 lakh in one case and Rs. 7,71,707.00 as duty and Rs. 12,00,000/- as penalty in the other case. The ld. Collector (Appeals) upheld the order of the ld. Additional Collector and hence the appeals before us.
2. Shri V. Sridharan, ld. Advocate appearing for the appellants, submits that Appeal No. E/524/95-NB deals with show cause notice dated 20-4-1992. He submits that in this show cause notice, four credits of duty have been dealt with. The following table shows the 4 credits :--------------------------------------------------------------------------------Sl.No.Entry No. & Date of Amount of duty Brief facts of the documents.--------------------------------------------------------------------------------(1) (2) (3) (4)-------------------------------------------------------------------------------- 30-10-1991 availed Rs. 270.00 (CED + SED) as excess credit which2.
Part I No. 17 dated 10- Rs. 32,352.00 The party received inputs on 9-1991. Part II No. 64 10-9-1991 whereas Credit dated 1-11-1991 taken on the authority of SGP dated 17-9-1991 on 1-11-19913.
Part II No. 75 to 79 Rs. 5,91,223.00 The party took and availed dated 9-12-1991 Credit on the authority of certificates consolidatedlyPart II No. 98 to 100 Rs.1,47,862.00 The party took and availeddated 22-1-1992 Credit on the authority of certificates issued without 3. The ld. Counsel submitted that the appellants have already paid the demand of Rs. 270/- indicated at Sl. No. 1 of the Table. He submitted that though the appellants had a good case on merits in respect of the demand of Rs. 32,352 against Item 2 of the table, since the facts involved in this case are lengthy, the appellants are not contesting the demand. Regarding Sl. Nos. 3 and 4 of the Table, the ld. Counsel submitted that the Department had alleged that the certificate issued by M/s. IPCL does not have printed serial number. He submitted that this objection is invalid; that the certificate carry a serial number filled up by hand; that the form prescribed for issue of the certificates do not indicate that the serial number should be pre-printed. Referring to the Circular No. 29/86 dated 21-8-1986 issued by the Central Board of Excise and Customs, the ld. Counsel submitted that this certificate does not require preprinted serial numbers.
4. The ld. Counsel submitted that the next objection of the Revenue is that the certificate issued by M/s. IPCL is of much later date than the date on which the inputs have actually been received and that the certificates were not accompanying the inputs. The ld. Counsel explaining the procedure followed by M/s. IPCL, submitted that the goods imported by M/s. IPCL first go to IPCL's regional office in Delhi; then the stock is transferred by IPCL to their consignment agent, United Agencies, Kanpur; that M/s. United Agencies, Kanpur supplies the goods to the appellants against various delivery challans; that periodically, IPCL issues a consolidated certificate regarding CVD duty paid on imported raw materials; that this certificate clearly indicates the various delivery challans against which the material is supplied by the consignment agent of M/s. IPCL. He submitted that the goods received in the factory are clearly relatable to the duty paying certificate issued by IPCL. The ld. Counsel submitted that the appellants make an entry in RG 23A Part I as soon as the goods are received, but credit is taken in RG 23A Part II only after the certificate showing CVD duty payment is received.
5. Regarding the duty paying documents accompanying the goods, the ld.Counsel submitted that Proviso to Rule 57G(2) as amended on 1-3-1986 and again amended on 15-4-1987 stipulates that "No credit shall be taken unless the inputs are received in the factory under the cover of a gate pass etc. ... "; that the Central Board of Excise and Customs in their clarifications on Modvat changes, issued through File No.V-21/4/57-TRU, dated 15-4-1997 clarified that Rule 57G is being amended so as to provide that for taking Modvat credit, the inputs shall be received under cover of prescribed duty paying documents. There may be instances where on account of movement by rail etc. the duty paying documents are received subsequently. In such cases, credit can be allowed only after receipt of the duty paying documents, but the inputs may be taken into use immediately after it is received, after making suitable entry in the RG 23A account. The ld. Counsel submitted that in view of the above amendments to the rules and the clarifications explaining the necessity of amendments, credit of duties can be taken after receipt of the goods on the strength of the duty paying documents. The ld. Counsel submitted that the facts of their case are that they had made entry of the goods in RG 23A Part I as soon as the inputs were received into the factory, but they had taken Modvat credit of duty paid on inputs in RG 23A Part II only after the duty paying document certificate from IPCL was received and that there was no irregularity whatsoever in doing so. The ld. Counsel, therefore, submitted that in so far as items mentioned at Sl. Nos. 3 and 4 are concerned, Modvat credit was rightly taken and was covered by provisions of Rules and the clarifications given by the Central Board of Excise and Customs and, therefore, prays that the appeal may be allowed.
6. Dealing with Appeal No. E/522/95, the ld. Counsel submitted that the show cause notice dated 3-1-1992 is well beyond six months from the date of taking credit; that if the Proviso to Rule 57-I(1) is applicable, then the entire demand raised under Rule 57-I is time barred; that in the show cause notice, there is no allegation of suppression or mis-statement of facts; that the show cause notice alleges that the appellants had taken Modvat credit other than in a manner provided under the rules; that this does not say that there was wilful mis-statement or suppression; that there are various ingredients provided for under Rule 57-I; that the show cause notice should satisfy the ingredients; that they have not been satisfied in the show cause notice in the present case. Citing the rulings of the Hon'ble Supreme Court in the case of H.M.M. Limited reported in 1995 (76) E.L.T. 497, the ld. Counsel submitted that the Apex Court held that extended period was not invokable unless show cause notice puts the assessee to notice specifically as to which of the various commissions or omissions stated in the proviso to Section 11A(1) of the Central Excises & Salt Act 1944 had been committed. The ld. Counsel submitted that this equally applies to Proviso to Rule 57-I of the Central Excise Rules. The ld. Counsel further submitted that it is true that in the impugned order of the ld.Collector (Appeals), averment of suppression has been made, but in the absence of such an allegation in the show cause notice, the allegation cannot be introduced at the adjudicating stage or the appellate stage.
The ld. Counsel submitted that this has been so held by the Apex Court in the case of H.M.M. Limited. The ld. Counsel submitted that the entire case of the Department is built on ground of deficient documents. He submitted that duty paying documents are sent to the Department with every requisite return and, therefore, if there was a deficiency they should have pointed out within 6 months from the date of taking credit. The ld. Counsel submitted that Sl. No. 8 of the show cause notice demanding Rs. 63,815/- pertains to entry No. 3 and 63 in RG 23A Part I. He submitted that the department's allegation is that the certificate is for a total quantity of 6 MT whereas the quantity received is 13 MT and, therefore, the department has held that Modvat credit of Rs. 63,815/- has been wrongly taken. The ld. Counsel submitted that they had taken Modvat credit for a smaller quantity of 6 MT and that there was nothing wrong in taking this credit. Summing up his arguments, the ld. Counsel submitted that in so far as the demands against Sl. Nos. 1 to 7 of the table in the show cause notice are concerned, they are time barred and in so far as Sl. No. 8 of the table in the show cause notice is concerned, Modvat credit has rightly been taken.
7. On the question of imposition of penalty, the ld. Counsel submitted that as the demand for duty is time barred, penalty cannot be imposed; that this ruling was given by the Apex Court. The ld. Counsel, therefore, prays that both the appeals may be allowed by setting aside the impugned order.
8. Shri Jangir Singh, ld. JDR, submits that the appellants have adduced arguments in Appeal No. 524/94-NB, at Sl. Nos. 3 and 4; that credit was taken only when the certificate showing payment of duty relatable to the case was received. He submitted that in all cases, the goods are required to come along with duty paying documents; that there was no provision for sending certificate covering a number of challans. He submitted that since the certificate showing the CVD duty paid on the inputs was received much later and since no permission of the Collector was sought, the lower authorities have rightly denied the benefit.
9. On the second question, the ld. JDR submitted that the show cause notice was issued on 3-1-1992 for the credit taken on 4-6-1991 for an amount of Rs. 4,46,455.35 and for the credit taken on 17-8-1991 for an amount of Rs. 63,815/- (total amount of demand Rs. 5,10,270.35). He submitted that in view of the fact that the appellants had not disclosed the full facts to the Department, the demand was rightly issued by invoking longer period in as much as the appellants had availed Modvat credit wilfully, deliberately and arbitrarily. On the question of imposition of penalty, the ld. DR submitted that since there was a contravention of rules in Section AA of Chapter 5 of Central Excise Rules, therefore, penalty has rightly been imposed under Clause (bb) of Rule 173Q: He reiterated the findings of the lower authorities.
10. Heard submissions of both sides. We find that in respect of Appeal No. 524/94-NB, the appellant did not contest Sl. No. 1 and Sl. No. 2 of the Table of the show cause notice. Therefore they are not being discussed and the order of the lower authorities in regard to these 2 serial numbers is upheld.11. In regard to Sl. Nos. 3 and 4, the contention of the Department was that duty paying documents had not accompanied the goods and, therefore, credit cannot be taken. We note that in his submissions, the ld. Counsel for the appellant has amply clarified the position factually and legally. We also note that Rule 57G was amended wherein care was taken to allow Modvat credit in case duty paying documents were received late. Thus, we find force in the arguments adduced by the ld. Counsel for the appellants in so far as Sl. Nos. 3 and 4 are concerned. Having regard to the submissions made by both sides and having regard to the facts that the law as amended and as was prevalent on the date of dispute, Modvat credit could be taken subsequent to the date of receipt of the inputs on the strength of certificate given by M/s. IPCL. In this view of the matter, we hold that Modvat credit was admissible to the appellants in respect of the entires at Sl. Nos. 3 and 4 of the show cause notice issued on 20-4-1992.
12. In so far as the show cause notice dated 3-1-1992 is concerned, we find that the show cause notice was issued on 3-1-1992 for credits taken on 4-6-1991 and described at Sl. No. 1 to Sl. No. 7 of the Table given in the show cause notice. The main contention of the ld. Counsel was that there was no allegation of suppression or wilful mis-statement and therefore the demand could be raised only for a period of six months. The ld. Counsel submitted that credit of duty was taken in respect of items Sl. Nos. 1 to 7 of the show cause notice on 4-6-1991, whereas the show cause notice was issued on 3-1-1992, thus the time was beyond 6 months. The Department has alleged that there was a deliberate attempt to avail Modvat credit. How this deliberate attempt is presumed is not borne by the facts placed on record. As there is no allegation of suppression or wilful mis-statement, we hold that the demands indicated at Sl. No. 1 to Sl. No. 7 of the show cause notice are time barred. In so far as Sl. No. 8 of the show cause notice dated 3-1-1992 is concerned, we find that credit was taken on 17-8-1991. Thus, the demand was within time. Here, we note that the allegation is that the appellants had received 13 MT, but the certificate covered only 6 MT and that the Department had held that this credit was not admissible to the appellant. We note that the appellants had taken credit of duty under the Modvat scheme for 6 MT only. This credit is supported by a certificate issued by M/s. IPCL. The appellants had received more than 6 MT of the product. In the circumstances, we do not see any reason as to why this credit should be disallowed. In the circumstances, we hold that the credit of Rs. 63,815/- taken on 17-8-1991 which is at Sl. No.8 of the show cause notice dated 3-1-1992 is admissible to the Appellants.
13. In so far as imposition of penalty is concerned, we find that the appellants have not pressed before us items against Sl. Nos. 1 and 2 of the show cause notice dated 20-4-1992. Sl. No. 1 of the table of the show cause notice dated 20-4-1992 shows a demand of excess credit taken. However, the duty amount in the case is only Rs. 270/-. The second entry against Sl. No. 2 of the show cause notice dated 20-4-1992 was not pressed before us in as much as it was argued that this demand entails voluminous documents to establish the case. Other amounts disallowed by the lower authorities have now been allowed by us for the reasons stated above against each.
14. Having regard to the totality of the facts and circumstances of the case, we reduce the amount of penalty to Rs. 10,000/- in Appeal No.E./524/ 95-NB. The penalty imposed in Appeal No. E/522/95-NB is set aside.
The impugned orders are, therefore, modified to the extent stated above and the appeals are disposed of accordingly. Consequential relief shall be admissible in accordance with law.