Full Judgment
M.C. 7-9-99 95-96 to 1,98,017 2.00/2000- Industries 97-98 Lakhs NB---------------------------------------------------------------------------E/3083 M/s. Chandra 30-8-99 Jan.
6,22,190 6.25/2000- Hi-Tech 1995 to Lakhs NB Engineers (P) March---------------------------------------------------------------------------E/2483 M/s.
G.M.I. 4-8-99 June 7,76,668 7.80/2000- Super Sales 1995 to lakhs NB Agencies Sept.
2. We have heard Shri Naveen Mullick, learned counsel, who, prima facie argues on the demands being partly barred by limitation. He submits that the applicants were under a bona fide belief that the inputs supplied to them were having the thickness as per the specifications prescribed by the DOT for the purpose of manufacture of steel tubes for supply to the DOT. He submits that this bona fide belief stands from two facts (i) that the suppliers were regular suppliers to the applicants and (ii) that the invoices under which the inputs came to them gave the description of the stocks as C.R. coils without mentioning the thickness of the coils and, therefore, the applicants did not have the knowledge that the goods, which were coming to them, were of thickness below that prescribed under the DOT specifications.
He, therefore, submits that the extended period is not applicable against the applicants since there was no intention to suppress or mis-declare, but there was only bona fide understanding by the applicants that coils received by them were of the prescribed specifications. He further submits that the non-issue of show cause notice to the suppliers of the C.R. coils vitiates the demands against the applicants, as it is only those suppliers who would be able to explain why they sent coils of thickness below the prescribed specifications. He also pleads financial hardship submitting that the applicants' units are lying closed for over two years and are not in a position to meet any requirement of pre-deposit of duty or penalty.
Lastly, he submits that going by the tolerance limits applicable for CR coils, the coils received by the applicants will reach the prescribed specifications of 2 mm and above and, therefore, the applicants' units have used inputs of the prescribed thickness in the manufacture of steel tubes and have correctly availed Modvat credit on the CR coils.
3. Learned SDR, Shri Prabhat Kumar, opposes the prayer on the grounds, inter alia, that the non-issue of show cause notice to the suppliers in no way vitiates the demand as the demand is to be raised and has been raised against the applicants who have utilized Modvat credit on inputs not used and not usable by them in the manufacture of steel tubes cleared by the applicants to DOT. He submits that there is no basis for holding that the applicants were under any bonafide belief that what was received by them matched the specifications for CR coils, since there is no evidence on record in the form of any correspondence to show that the applicants had placed orders on suppliers for supply of CR coils of the specifications as prescribed by the DOT. He submits that even going by the tolerance limits applicable to CR coils, the inputs received by the applicants fall short of the prescribed specifications for CR coils. Lastly, he submits that the plea of financial hardship should not be accepted for totally dispensing with the requirement of pre-deposit of duty and penalty, since the applicants have not got a prima facie case on merits of the matter.
4. We have carefully considered the rival submissions. The contentions both on merits and on the applicability of extended period of limitation are highly debatable in view of the various pieces of evidence discussed by the adjudicating authority in the impugned order and the applicants cannot be said to have made out a strong prima facie case for waiver on the issue of limitation. Noting the plea of financial hardship and having overall regard to the facts and circumstances of the case, we direct the applicants to deposit the following amounts towards duty within a period of eight weeks from today: -(i) M/s. Shri Arjan Engineering Industries ...
Rs. 2.5 lakhs(ii) M/s. M.C. Industries ...
Rs. 50,000/-(iii) M/s. Chandra Hi-Tech Engineers P. Ltd. ...
Rs. 1.5 lakhs(iv) M/s. GMI Super Sales Agencies ...
Rs. 2 lakhs On such deposit, the pre-deposit of balance duty and the entire penalty shall stand waived and there shall be stay of recovery during the pendency of the appeals. Failure to comply with these directions shall result in vacation of stay and rejection of appeals without prior notice.