1. When the stay application was argued, it appeared that the main appeal itself could be taken up for disposal at this stage. With the consent of both the parties, this was done.
2. The appellants are operating under the Modvat scheme. When the liquid inputs like paraxylene and methanol were received under duty paying challan, the assessees caused weighment to be done. Credit was taken on the quantity actually received and not on the basis of the quantity shown in the duty paying documents. However, with effect from 9-5-1995, although the assessees continued to weigh and ascertain the actual quantity received, they took Modvat credit on the quantity shown in the duty paying documents. The department came across the data regarding weighment and observed that during the period September, 1995 to March, 1997, the duty leviable on the material short received amounted to Rs. 15,69,878. The assessees voluntarily deposited this amount on 11-4-1997. Even then, on 12-5-1998, the show cause notice was issued. The Commissioner in the impugned order confirmed the demand and also imposed equivalent penalty on the assessees. The present appeal and the stay application arise Out of this order.
3. We have heard Shri Parthasarathy, the ld. Advocate for the appellants and Shri Ashokan the ld. DR for the revenue.
4. Shri Parthasarathy submits that the quantum of Modvat credit should be determined by the quantum of duty shown in the invoice indicating payment of duty. It is his submission that the quantity actually received is not material. It is his submission that even if the quantities received are higher than shown in the duty paying documents, the credit would be limited to the duty calculatable on the quantity shown to have been payable and not on the actual quantity received. In this situation, there was no cause for confirmation of the demand let alone for the imposition of penalty. He further submits that the extended period could not be invoked. It is his submission that the assessees were not required to intimate the department the factum of weighment. Therefore, no charge could be made of suppression. It is further submitted that the actual variation is very low.
5. Shri Ashokan on the other hand supported the belief of the Commissioner in the impugned order.
6. We have carefully considered the submissions made by both the sides and have also seen the provisions of law.
7. Rule 57G prescribes the procedure to be observed by the manufacturer. Sub-rule (3) thereof speaks of "inputs...received in the factory." The Commissioner has held in the order that this rule indicates that the credit has to be restricted to the physical quantity of the inputs that is received. We also find that in terms of Rule 57A(4) the credit is allowed on the inputs used (emphasize supplied) in the manufacture of final product. These two provisions put together suggest that the Modvat credit can be taken on the actual quantity received in the factory which quantity is used in the manufacture of the final product.
8. We have also taken cognizance of the submissions made by Shri Parthasarathy. It is correct that where the goods are not subjected to weighment on receipt, the assessees would be permitted to take the Modvat credit to the extent of the duty shown to have been paid on the face of the covering document. We, however, observe that where the assessees chose to weigh the goods and where the quantity actually received and used by him is less than what is shown in the document, then the credit available to him is on the lesser of the two quantities, that is what is actually been received and used.
9. Where this situation prevails, the assessee who is in the knowledge that the inputs so received are less than those shown in the covering documents, it is for him to voluntarily take the less credit. Where the assessee is in such knowledge and where the department have no knowledge of the situation, the department can allege suppression of facts. Weighment sheets are not the documents prescribed in the legislature. The assessee was working under the self removal procedure and therefore, there is no reason or cause for the jurisdictional officer to know about the existence of the weighment sheets and the shortages in the weighment of inputs that they indicated. In this situation, we do not see any reason to agree with the submission on limitation.
10. We have seen the findings given by the Supreme Court in the judgment in the case of Chemphor Drugs & Liniments 1989 (40) E.L.T. 276 (S.C.) cited by the ld. Advocate. We are satisfied that in the present case the situation is as was under para 8 of the cited judgment. We further observe that the assessee on realizing the situation had voluntarily deposited the amount of credit wrongly taken. On the other hand, we find that there was little cause for imposing penalty. As Shri Parthasarathy rightly submitted, if the assessee had not weighed the inputs, they would have taken total credit on the inputs received. He is also correct in pointing out that the majority of the assessees who do not take weighment may be claiming Modvat credit where less inputs are received. In this situation, where the assessees due to his own action has been subjected to payment which other assessees are not subjected to, there is little reason to uphold the order of the Collector. We, therefore, hold that the ld. Commissioner was right in confirming the demand but not right in imposing the penalty. We confirm the orders of demand and remit the penalty imposed.