2004 (2) TMI 610 - AT - Central Excise

Demand - Limitation - Invocation of extended period - Penalty - Cenvat/Modvat - Duty paying documents

Summary

Issues Involved:
1. Denial of Modvat credit on the basis of endorsed invoices.
2. Denial of Modvat credit due to non-pre-authentication of invoices.
3. Denial of Modvat credit on the basis of original copies of invoices.
4. Denial of Modvat credit due to invoices not bearing the signature of the input supplier and pre-printed serial numbers.
5. Time-bar issue concerning the demand for Modvat credit.
6. Imposition of penalty under Rule 173Q(1)(bb) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Denial of Modvat Credit on the Basis of Endorsed Invoices:
The appeal concerns the denial of Modvat credits totaling Rs. 26,85,832, with Rs. 24,39,841/- taken on HR strips based on endorsed invoices from M/s. Indo-Japan Steel Ltd. to M/s. HLMS. The lower authority disallowed these credits, citing that endorsed invoices were not valid documents under Rule 57G for availing Modvat credit post-1-4-94. The appellant argued that the initial stage of the invoice system (introduced w.e.f. 1-4-94) should consider the previous gate pass system, which recognized endorsed gate passes. The Tribunal's Larger Bench in Balmer Lawrie & Co. Ltd. v. CCE [2000 (116) E.L.T. 364] held that endorsed invoices post-1-4-94 were invalid for Modvat credit, thus disallowing the credit of Rs. 24,39,841/-.

2. Denial of Modvat Credit Due to Non-Pre-authentication of Invoices:
Credit of Rs. 1,18,155.80 was taken on invoices not pre-authenticated. The appellant contended that this was a minor omission by the input supplier and should not invalidate the credit, especially since there was no dispute regarding the duty-paid nature of the inputs. The Tribunal's Larger Bench in Kamakhya Steels (P) Ltd. v. CCE [2000 (121) E.L.T. 247] supported this view, allowing the credit despite procedural defects.

3. Denial of Modvat Credit on the Basis of Original Copies of Invoices:
Credit of Rs. 47,704.14 was taken on the basis of original copies of invoices. The Tribunal's Larger Bench decision in CCE v. Avis Electronics Pvt. Ltd. [2000 (117) E.L.T. 571] established that original invoices were not valid documents for Modvat credit under Rule 57G, leading to the disallowance of this credit.

4. Denial of Modvat Credit Due to Invoices Not Bearing Signature of Input Supplier and Pre-printed Serial Numbers:
Credit of Rs. 80,131.27 was taken on invoices lacking the input supplier's signature and pre-printed serial numbers. The appellant argued that these were minor procedural defects. The Tribunal's Larger Bench in Kamakhya Steels (P) Ltd. v. CCE [2000 (121) E.L.T. 247] supported the allowance of credit despite such defects, provided there was no dispute on the duty-paid nature and utilization of inputs.

5. Time-bar Issue Concerning the Demand for Modvat Credit:
The demand for Rs. 24,39,841/- was for the period 3-4-94 to 4-6-94, raised in a show-cause notice dated 2-4-96. The appellant argued no suppression of facts, having disclosed details in a letter dated 10-6-94. The Tribunal held that disclosure post-period did not negate suppression during the period, supporting the extended limitation period for the demand, as established in Nizam Sugar Factory v. CCE [1999 (114) E.L.T. 429].

6. Imposition of Penalty Under Rule 173Q(1)(bb) of the Central Excise Rules, 1944:
A penalty equal to the disallowed credit was imposed on the grounds of suppression. The Tribunal upheld the finding of suppression but reduced the penalty to Rs. 5 lakhs, considering the admissibility of certain credits and the circumstances of the case.

Conclusion:
The Tribunal upheld the disallowance of Modvat credits based on endorsed invoices and original copies of invoices. Credits taken on invoices with minor procedural defects were allowed. The extended period for the demand was justified due to suppression. The penalty was reduced to Rs. 5 lakhs, considering the partial success of the appellant's claims.