2003 (4) TMI 491 - AT - Central Excise

Summary

Issues:
Appeal against Commissioner (Appeals) order allowing respondent's appeal based on earlier Tribunal order. Modvat credit reversal due to irregularities in invoices of M/s. Calcutta Trades Corporation (CTC). Allegation of fraudulent issuance of modvatable invoices by CTC. Additional Commissioner's order directing modvat credit payback and penalty imposition. Tribunal's decision in favor of respondent based on previous Tribunal order regarding CTC proceedings. Revenue's reliance on Tribunal's decision in another case for denial of modvat credit without receiving inputs.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Kolkata was against the order of the Commissioner (Appeals) which had favored the respondents based on a prior Tribunal decision. The case revolved around the reversal of modvat credit due to irregularities in invoices of M/s. Calcutta Trades Corporation (CTC), leading to allegations of fraudulent practices in issuing modvatable invoices. The respondent, a manufacturer of pulp and paper making machines, had availed modvat credit on raw materials received from CTC. The Directorate General of Anti Evasion (DGAE) found irregularities in CTC's invoices, prompting the respondent to pay back the modvat credit availed from CTC.

The Additional Commissioner of Central Excise held that the respondent had taken modvat credit without receiving the corresponding inputs and directed them to pay back the credit irregularly availed, imposing a 100% penalty. However, the Commissioner (Appeals) overturned this decision based on a previous Tribunal order regarding proceedings against CTC. The respondents argued that since proceedings against CTC were dropped by the Tribunal and the High Court, the basis for initiating proceedings against them was no longer valid. They cited a Tribunal decision in a similar case where appeals of dealers were allowed due to proper modvatable invoices.

On the other hand, the Revenue relied on a Tribunal decision in another case to support the denial of modvat credit when inputs were not received. After considering arguments from both sides, the Tribunal found merit in the respondent's contention. They noted that the proceedings against the respondents were based on allegations against CTC, which had been dismissed by the Tribunal and the High Court. The Tribunal held that since the appeals of the dealer (CTC) were allowed and the respondents were only beneficiaries of the invoices, their benefit could not be overturned. The Tribunal distinguished the decision in the case of M/s. Prem Cables Pvt. Ltd., emphasizing the need to consider evidence in each case regarding the receipt of inputs along with invoices.

Ultimately, the Tribunal rejected the Revenue's appeal, ruling in favor of the respondents based on the settled issue in previous decisions. The judgment highlighted the importance of evidence in determining the validity of modvat credit claims and the impact of related proceedings on such claims.