Full Judgment
2. M/s. Amit Industries were engaged in the manufacture of electrical stampings and laminations falling under CH 83.12 of the CET Schedule and were availing Modvat/Cenvat credit facility in respect of inputs used in the manufacture of the said products. From the results of investigation made into the process of manufacture undertaken by them, it appeared to the department that the party was showing an abnormally high percentage of scrap generation in their manufacturing process.
Scrap was generated at three stages viz. (a) sorting stage (at which unusable material was sorted out of imported scrap), (b) slitting stage (at which scrap was generated in the form of thin side-cuttings) and (c) cutting/punching stage. It appeared to the department that the scrap generation at the slitting and cutting stages was very negligible (not more than 5% of the total quantity of raw materials used) and that the maximum generation of scrap was at the sorting stage. The department did not consider the sorting stage as a part of the process of manufacture of final products and, therefore, they held the view that the material rejected at the sorting stage was not eligible input as it could not be said to have been used "in or in relation to the manufacturing process". Accordingly, by show-cause notice dated 22.6.2001, the department proposed to recover from the party the duty equivalent to the Modvat/Cenvat credit taken by them for the period from 1.4.96 to 31.3.2000 in respect of the materials rejected at the sorting stage. Obviously, the demand was for a period beyond the normal period of one year prescribed under Section 11A(1) of the Act. The show-cause notice invoked the extended period of limitation under the first proviso to the said sub-rule by alleging "suppression of facts and contravention of Modvat/Convat Rules with intent to misutilise the credit". The show-cause notice also proposed to penalize Suresh Agarwal (proprietor of Amit Industries) under Rule 209A by alleging that he had aided and abetted the offence committed by M/s. Amit Industries. The allegations were denied and the demand of duty contested. The Commissioner, who adjudicated the show-cause notice, passed the impugned order.
4. The counsel for the appellants challenged the order of the Commissioner on merits as well as on limitation and the SDR defended the order on the strength of the findings recorded therein.
5. After a careful examination of the submissions, we are of the view that this case can be disposed of with a considered decision on the limitation issue raised before us. The demand raised in the show-cause notice is for the period 1.4.96 to 31.3.2000. The show-cause notice was issued on 22.6.2001, i.e. beyond the normal period of one year prescribed under Section 11A (1) of the Act. Ld. Counsel has contended that the demand of duty is hopelessly barred by limitation as, on the facts of the case, the larger period of limitation was not invocable.
Counsel submitted that, in the classification declaration filed under Rule 173B on 4.4.96, the appellants had explained their manufacturing process, which included the various stages viz. sorting, cleaning, slitting, cutting, etc. In their Modvat declaration filed on 27.7.98, the appellants had clearly declared the inputs as "rejected" materials.
The unusable material sorted out at the initial stage sold out after reversing Modvat credit and this fact was duly reflected in RT-12 returns. The relevant facts were thus made available to the department and, therefore, it could not be said that any relevant fact had been suppressed by the appellants. Ld. Counsel, therefore, contended that the allegation of suppression of facts, leveled in the show-cause notice against the appellants, was not substantiated in this case and, therefore, the larger period of limitation was not liable to be invoked against them. Ld. Counsel relied on the decision of this Tribunal in D.C.M. Engg. Products v. CCE, Chandigarh-II, 2002 (147) ELT 820 (Tri.-Del.) wherein it was found that the relevant documents such as price lists had been filed with the department by the assessee and, therefore, the larger period of limitation was not invocable against them. Counsel pointed out that this decision of the Tribunal was affirmed by the Supreme Court vide [2003 (153) ELT A 301]. Reliance was also placed on the Tribunal's decision in Pranav Vikas (India) Ltd. v.CCE, New Delhi, 2002 (83) ECC 786 (Tri.-Del.) : 2002 (148) ELT 963 (Tri-Del.), wherein it was held that suppression of facts could not be attributed to the assessee as each and every fact was available to the department through the details furnished in the RT-12 Returns filed by the party. The documents referred to by the counsel were not contradicted by the DR, nor any better case law cited by him on the limitation issue.
7. The allegation raised in the show-cause notice for raising the demand of duty for a period beyond the normal period of limitation is that M/s. Amit Industries suppressed facts relating to the Modvat/Cenvat credit taken by them on the scrap generated in their factory during the said period. The relevant period is 1.4.96 to 31.3.2000. We note that, as early as on 4.4.96 M/s. Amit Industries had, in their classification declaration under Rule 173B, listed the raw materials used for manufacture of their final products and had also given an account of the manufacturing process as under: "Manufacturing Process:--Insulating shorting, cleaning, slitting in various size as required (by cutters) Punching at various stage with the help of Dies & Power Presses final stage cutting with help of cutter Lamination ready. (Shapes E & I, Rectangle, mitered used in distribution Transformers & Power)".
It is clear from the above account of manufacturing process that the appellants considered sorting also as a part of the process. [Counsel has pointed out that "sorting" was misspelt as "shorting" in the classification declaration and the veracity of this submission has not been doubted by the DR.] Further, in their modvat declaration filed on 27.7.98 under Rule 57G, they had described their inputs as rejected silicon electrical sheets & strips, rejected cold rolled steel strips, rejected electrical lamination and stampings etc. The rejects which were sold as such after reversal of Modvat credit were duly reflected in their RT-12 returns. In our judgment, the particulars furnished by the appellants through their Classification/Modvat declarations and RT-12 returns were enough for the department to clear any doubt with regard to removal of scrap as such from factory and utilization of other scrap materials in the manufacturing process. Atleast after the Modvat declaration was filed on 27.7.98, wherein rejected materials were cited as inputs, it should have occurred to the department that the appellants were claiming Modvat credit on scrap used in the various stages of the process of manufacture, including the sorting stage. It was only after a long period of time that the department, for the first time, came out with the allegation of irregular availment of Modvat credit as well as of suppression of facts, against the party. In the case of DCM Engg. Products (supra), this Tribunal found that the relevant documents had already been filed with the department by the assessee and, therefore, the larger period of limitation was not invocable against them for demanding duty. This decision has been affirmed by the Supreme Court vide 2003 (153) ELT A-301. In the case of Pranav Vikas (supra) also, it was found that, as each and every fact was made available to the department through TR-12 Returns, suppression of material facts could not be attributed to the assessee. In both the decisions cited by the counsel, the demand was held to be time-barred.
Following the ratio of these decisions/we hold that, in the instant case, there was no suppression whatsoever by the party and, therefore, the larger period of limitation was not invocable against them.
Accordingly, the entire demand raised by the department against M/s.
Amit Industries is barred by limitation. The demand is, therefore, set aside; Consequently, the penalty imposed on them is also set aside. The only finding recorded against Suresh Agarwal in the impugned order is that he aided and abetted the offence (of suppression of facts with intent to evade duty) of M/s. Amit Industries. This finding is of no relevance to Rule 209A where under a person to be penalized must, knowing that certain excisable goods were liable to confiscation under the Central Excise Act/Rules, either have acquired possession of those goods or have been concerned in physically dealing with the goods in any of the various modes specifically mentioned under the Rule. Even otherwise, the Commissioner's finding is of no consequence in the wake of our finding that M/s. Amit Industries did not suppress any fact.
Therefore, the penalty on Suresh Agarwal is also set aside. The impugned order is set aside and the appeals are allowed.