2005 (3) TMI 543 - AT - Central Excise

Summary

Issues Involved:
1. Receipt of HR/CR Sheets and Coils by the Appellant.
2. Discrepancies in the thickness of materials received.
3. Evidence of payment of octroi and transportation.
4. Validity of sub-Heading Nos. mentioned in dealers' invoices.
5. Invocation of extended period of five years.
6. Fraudulent availing of modvat credit.
7. Responsibility and onus of proof regarding receipt and specifications of materials.
8. Limitation period for issuing the show cause notice.

Issue-wise Detailed Analysis:

1. Receipt of HR/CR Sheets and Coils by the Appellant:
The Commissioner alleged that the assessee availed modvat credit on hot rolled/cold rolled coils/sheets/plates which were not received in their factory. The assessee contended that they properly recorded and communicated the information to the Department. However, the Commissioner found this submission incorrect, citing the statement of the Director, which indicated that each consignment was tested by the quality control department.

2. Discrepancies in the Thickness of Materials Received:
The Commissioner noted that the thickness of the goods received differed from those mentioned in the purchase invoices. The assessee could not convincingly explain these discrepancies or produce details of freight octroi payments and thickness of the goods supplied. The Commissioner emphasized that the assessee should have rejected the materials if they did not meet the required specifications.

3. Evidence of Payment of Octroi and Transportation:
The Commissioner found that the assessee and the registered dealers failed to produce any documents showing payments of freight and octroi. The non-production of such vouchers was a significant basis for the charge of non-receipt of inputs.

4. Validity of Sub-Heading Nos. Mentioned in Dealers' Invoices:
The Commissioner observed that the sub-Heading Nos. mentioned in the dealers' invoices indicated thicknesses other than those actually received. This discrepancy was used to support the allegation of fraudulent availing of modvat credit.

5. Invocation of Extended Period of Five Years:
The Commissioner justified the invocation of the extended period of five years, citing the assessee's failure to maintain proper records and information despite their experience in Central Excise matters.

6. Fraudulent Availing of Modvat Credit:
The Commissioner concluded that the assessee fraudulently availed modvat credit based on invalid invoices issued by registered dealers. The inability to explain the discrepancies in thickness and the lack of supporting documents for transportation and octroi payments were critical factors in this conclusion.

7. Responsibility and Onus of Proof Regarding Receipt and Specifications of Materials:
The Commissioner emphasized that it was the assessee's responsibility to ensure that the raw materials received were of the correct specification. The failure to establish this and the reliance on the dealers' mistakes were not acceptable defenses.

8. Limitation Period for Issuing the Show Cause Notice:
The Tribunal found that no suppression or mis-declaration by the assessee was established. The assessee had filed declarations and copies of invoices, which were audited by the Department. Hence, the plea of limitation was upheld, and the invocation of the extended period was not justified.

Tribunal's Findings:
(a) The Tribunal found that the non-production of freight and octroi vouchers by the assessee was not a valid basis for the charge of non-receipt of inputs, as the freight and octroi were to be borne by the dealer, M/s. Shipyard Company.
(b) The statement of Shri K. Mehta confirmed that the required thickness of M.S. Plates was supplied, negating the charge of non-receipt of inputs.
(c) The Tribunal found no reason to deny the credit on the grounds of non-receipt of inputs, as the chain of receipt of the inputs was proven.
(d) The Tribunal dismissed the allegation of non-utility/usefulness of different gauge thicknesses, as the assessee used a wide range of thicknesses for different end uses.
(e) The Tribunal found no evidence of a deliberate attempt to benefit from incorrect chapter headings on invoices.
(f) The Tribunal found that the assessee followed proper procedures for receiving and inspecting materials, and the adjudicator's findings of no complaints about order defects were not upheld.
(g) The Tribunal held that non-compliance with submission of Purchase Advice could not be grounds for suppression to invoke the larger period.
(h) The Tribunal deemed the adjudicator's findings on the non-possession of machinery for flattening strips as irrelevant.
(i) The Tribunal upheld the plea of limitation, finding no suppression or mis-declaration by the assessee.
(j) The Tribunal concluded that the order for reversal of credit and imposition of penalty could not be upheld.

Conclusion:
In view of the findings, the order was set aside, and the appeal was allowed.