Full Judgment
2. The appellants, who were the three units of the manufacturer, were receiving inputs for further manufacture of their finished goods from their own units as well as from others such as M/s. Pride Plast, P.P.Packing Ltd., which were cleared by those units without determining the value as 115% of the cost of production or manufacture of such goods in terms of Rule 8 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 which had resulted in under valuation in respect of the said goods during the period from 11/07/2000 to 21/03/2001. The differential duty was paid thereafter. The assessee availed cenvat credit on the basis of supplementary invoices issued for the duty paid in March, 2001 and May, 2001 respectively. In terms of Rule 57AE(1)(i) of the Central Excise Rules, as in force on the date of issue of supplementary invoices, the cenvat credit should be taken by a manufacturer on the basis of supplementary invoices issued by the manufacturer of inputs or capital goods under Rule 52A or 52AA or 100E from his factory or from his depot or from the premises of the consignment agent of the said manufacturer, in case additional amount of excise duty has been paid, except where the additional amount of duty becomes recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act or of the Customs Act, 1962 or the rules made thereunder with intent to evade payment of duty. The department was of the view that the supplementary invoices issued by the suppliers of inputs were invalid documents in terms of the above rule and on this basis show cause notices were issued to all the three units proposing recovery of wrongly availed cenvat credit and proposing imposition of penalty on the units as well as on their officers. The notice issued to the Wada, (Thane) unit is dated 09/04/2002 proposing recovery of duty of Rs. 1,14,62,018/-; the notice to the Murbad unit is dated 09/04/2002 proposing recovery of duty of Rs. 26,47,064/-; the notice to the Vasind unit was also issued on 09/04/2002 proposing recovery of duty of Rs. 51,32,481/-. The notices were adjudicated by three separate orders of the Commissioner of Central Excise, who confirmed the demands raised in the notice together with interest; imposed penalties of amounts equal to duty on each of the three units. In respect of Wada (Thane) unit he imposed a penalty of Rs. 29,60,000/- on its General Manager (Commercial) and Rs. 5 lakhs each on the Commercial Manager and the Deputy Manager (Commercial) under Rule 209A; in respect of Murbad unit a Penalty of Rs. 6,95,000/- was imposed on its General Manager (Commercial) under Rule 209A; and in respect of Vasind unit a penalty of Rs. 13,45,000/- on its General Manager (Commercial) and penalties of Rs. 5,00,000/- each on its Commercial Manager and Deputy Manager (Commercial) was imposed under Rule 209A Hence these appeals.
3. We have heard the learned Counsel Shri R. Nambirajan appearing along with Shri S.S. Gupta, Chartered Accountant and the learned JCDR Shri M.K. Gupta. We find that in February, 2001 the Central Excise department pointed out to the other units of the appellants who had manufactured and supplied inputs to the three units in appeal before us, that they were liable to pay differential duty on the basis of Rule 8 of the Valuation Rules, 2000, namely, 115% of the cost of production of excisable goods and the input supplier units paid differential duty immediately. The present appellants have taken credit of differential duty based on supplementary invoices issued in terms of Rule 57AE(l)(i) of the Central Excise Rules. Show cause notices were issued to the Vasind unit of the appellants proposing recovery of differential duty and appropriation of amounts already paid by them in respect of goods manufactured by them and cleared to the appellant's other factories, and proposing imposition of penalty. Similarly show cause notice dated 09/04/2002 was issued to the Wada (Thane) unit proposing demand of differential duty and appropriation of the amount of Rs. 49,60,618/- already paid on clearance of the goods to the appellants' other factories. The Deputy Commissioner of Central Excise passed order-in-original 1021 and 1022/01-02 dated 22/01/2002 confirming the demands appropriating the amount already paid and imposed penalty of Rs. 25 lakhs and Rs. 5 lakhs on Vasind and Wada (Thane) unit respectively; appeals were preferred to the Commissioner (Appeals) who vide his order-in-appeal dated 31/10/2002 upheld the penalty; the appellants filed appeal Nos. E/155 & 156/2003-Mum contending that since the show cause notice did not allege any suppression of facts, mis-statement penalty cannot be imposed; the Tribunal passed final order No. A/157 and 158/WZB/2004-CI dated 07/01/2004 allowing the appeals by holding that the department had not contested the stand that show cause notices issued to these units did not allege suppression, mis-statement, fraud, collusion, etc.
4. Thus in respect of supplementary invoices issued by the two other factories of the same appellants, who supplied inputs to the present units, it has been held that differential duty did not become recoverable by reason of fraud, collusion, wilful mis-statement or suppression and therefore the supplementary invoices are valid for the purpose of appellants taking additional credit and are not covered under the exception clause of Rule 57AE(1)(i).
5. As regards the supplementary invoices issued by the Murbad factory, the appellants clearly stated in, the reply to the notice that no notice has been issued to such unit in respect of differential duty paid by that unit. Therefore credit taken on the basis of the supplementary invoices issued to other factories of the appellants is correct.
6. In respect of the supplementary invoices issued by other input suppliers such as M/s. P.P. Packaging and M/s. Pride Plast, we find that the appellants specifically and unequivocally contented in the reply to the show cause notices that the differential duty paid by these units was not on account of suppression, mis-statement, etc., has not been rebutted by the adjudicating authority in the present impugned orders. The burden of proving that the differential duty covered by the supplementary invoices in question become recoverable on account of suppression, wilful mis-statement, fraud collusion, etc., in order to apply Rule 57AE(1)(i) lies on the Revenue particularly in view of the stand taken by the appellants. There is nothing on record to this effect. In the absence of such a finding against the input manufacturer the department cannot subsequently allege (at the time of taking of credit by the recipient factories) that differential duty so paid by the supplier units were by reason of fraud, suppression, etc., We therefore hold that the appellants herein are eligible to the credit in question.
7. Further we also note that in the case of payment of differential duty in respect of goods cleared on stock transfer from one unit to another of the same manufacturer the allegation of fraud, suppression, etc., cannot sustain since the duty paid by the input manufacturer units is available by way of credit to the recipient factory. For this reason also we hold that the appellants are entitled to the credit of the amounts in question. Accordingly we set aside the denial of the credit. Penalties imposed on the appellant units and their officers is also set aside as unsustainable in view of our above findings.
8. In the result we set aside the impugned orders and allow the appeals.