Judgment:
1. In this appeal, the Revenue has questioned the validity of the impugned order dtd.24/05/1996, vide which the Commissioner had dropped the proceeding against the Respondents, for reversal of the modvat credit of Rs. 1,45,790.70.
2. The Respondents are engaged in the manufacture of mild steel ingots for which raw material was purchased by them from outside on the basis of gate passes, from the ship breaking companies/traders, in the month of April 1992 and availed modvat credit of Rs. 1,45,790.70. But on scrutiny of the gate passes by the officers of the Central Excise, 15 out of 213 gate passes, were found to be bogus as issuance of the same was denied by the consigner of the goods. The respondents were accordingly issued the show cause notice for reversal of the modvat credit. In reply, they pleaded their bonafide in the purchase of raw material, on the basis of the gate passes against payment through cheques and also raised the plea of limitation by alleging that the demand for the reversal of modvat credit raised by the Department was time barred.
3. The Adjudicating authority accepted the plea of the Respondents, and dropped the proceedings, through impugned order. None has come present on behalf of the Department. No request for adjournment has been also received from them. Therefore I proceed to decide the appeal on merits, after hearing the learned counsel.
4. The perusal of the impugned order shows that the adjudicating authority had dropped the proceedings against the respondents solely on the ground of limitation by observing that there was no justification for invoking the extended period, for want of any evidence to establish their complicity. To substantiate and support these observations/findings of the adjudicating authority, the learned counsel has contended that the respondents were not aware of the fake nature of the disputed gate passes and that they had purchased the raw material on payment through cheques and as such extended period of limitation could not be invoked against them. But I am unable to subscribe to this contention of the counsel and also accept the above referred observations of the adjudicating authority. The adjudicating authority, in the impugned order, has recorded specific findings that the disputed 15 gate passes on which respondents took modvat credit, were fake/bogus as even the person who according to the respondents issued these gate passes, denied his writing and signatures on the same. Therefore, it is difficult to accept or hard believe, that the respondent who purchased raw material could not or did not know that the gate passes which they procured as proof of their purchase of raw material, were not genuine, rather it can be safely inferred that the officials of the respondents company knew everything about bogus nature of the gate passes in dispute.; 5. Regarding, payment through cheques by the respondents of the raw material purchased through these gate passes, in my view, there is no evidence on record to produce the same. In reply to Show Cause notice, respondents had only dis-closed the details of nine cheques through which the payment was made. But no evidence has been brought on records by them to co-relate the payment of these cheque, to the goods covered by the fake passes. The adjudicating authority has not gone into aspect of the matter at all. The learned Commissioner, who adjudicated the show cause notice, had accepted the plea of the respondents regarding payment through cheques without verifying the same and without asking the respondents to co-relate with the goods of the disputed gate passes.
6. The findings of the adjudicating authority that the respondents did not play any fraud on the department and had no role in the preparation of the disputed fake gate passes, cannot be sustained legally. As observed above, it is difficult to accept that the respondents did not know about the fake character of the gate passes, rather the initial inference to be drawn is that they had full knowledge that the disputed gate passes were bogus. The department could not come to know about the forgery till the scrutiny of the gate passes, was carried out by them.
To say there was no suppression of the facts by the respondents from the department about the forgery of the gate passes, would not legally justifiable, in the light of the facts and circumstances referred to above. Therefore, the findings of the learned Commissioner that the extended period of limitation was not available to the Department, cannot be sustained. The ratio of the law laid down in IDL Chemicals Ltd. v. C.C.E. Bhubaneshwar - 1996 (88) E.L.T. 710 referred by the learned counsel is not attracted to the facts of the present case. In that case simultaneous proceedings were also taken out against the supplier of inputs and part of duty was already recovered from him. For that reason, it was observed that the extended period of limitation could not be used against the assessee who had taken credit on the non genuine gate passes especially when there was no evidence to prove his collusion with the supplier. But such is not the position in the case in hand.
7. In light of the discussion made above in my view, the matter deserves sent back to the adjudicating authority for denovo proceedings and decision of the case after hearing both the sides. Consequently the impugned order of the Commissioner is set aside and case sent back to the adjudicating authority for fresh decision, in accordance with law after hearing both the sides. The appeal of the revenue stands allowed by way of remand.