2005 (1) TMI 520 - AT - Central Excise

Issues Involved:
1. Irregular availment of Modvat credit in respect of A.S. 304 grade of SS Sheets/Coils.
2. Short payment of duty on the value of plastic Thermoware cleared without stainless steel tiffins.
3. Question of time-bar.
4. Penalties liabilities.

Detailed Analysis:

Issue (A): Irregular Availment of Modvat Credit
Facts:
- The appellants purchase SS coils/sheets of both A.S. 304 grade (superior) and Rolling grade (inferior) from registered dealers and manufacturers.
- Modvat credit is taken based on invoices issued by registered dealers or manufacturers.
- The receipt and consumption of total quantity of SS Coils/Sheets are not disputed.
- There is no evidence of substitution of A.S. 304 grade material by Rolling grade material.

Revenue's Case:
- Job workers stated they used only Rolling grade steel for domestic market containers and A.S. 304 grade for export.
- Purchase orders did not show the grade of SS steel ordered.
- The Director corroborated job workers' statements but could not account for A.S. 304 grade in the final products.
- A.S. 304 grade was used only in exports; the rest was not received or substituted.

Tribunal's Findings:
- Job workers could not have known the end-use of containers (domestic/export) and their statements were unreliable without corroborative evidence.
- No legal requirement exists for grade-wise accounting of SS steel inputs.
- Failure to draw samples from the factory or job workers' premises to test nickel content weakens the Revenue's case.
- Registered dealers confirmed supply as per invoices, which referenced parent invoices showing SS grade.
- The Show Cause Notice was ambiguous, alleging both non-receipt and substitution of A.S. 304 grade.
- The demand for recovery of Modvat credit is not sustainable on merits or law, as the Show Cause Notice issued under Rule 57-I(ii) was invalid post-substitution by Cenvat Credit Rules.

Issue (B): Short Payment of Duty on Plastic Thermoware
Facts:
- The appellants declared two types of clearances: with and without SS tiffins.
- They paid duty on the value including SS containers when cleared together and without SS containers when cleared separately.
- Stainless steel tiffins were purchased and sold separately from the godown.

Revenue's Grounds:
- SS tiffins were designed as parts of plastic thermoware and their value should be included in the value of plastic thermoware cleared without SS tiffins.

Tribunal's Findings:
- The Department was aware of the two types of clearances and trading activities.
- Goods are to be assessed based on the form they are cleared from the factory.
- The value of SS containers, bought separately and sold from the godown, cannot be added to the value of plastic thermoware cleared without SS containers.
- Reliance on case laws supports that goods should be assessed as cleared.

Issue (C): Question of Time-Bar
Findings:
- The adjudicator's reasons for invoking the larger period under Section 11A were based on assumptions not supported by facts.
- The period as per the proviso to Section 11A(1) cannot be invoked on such assumptions.

Issue (D): Penalties Liabilities
Findings:
- When duty demands and Modvat violations are not upheld, the order on penalty and interest cannot be sustained.
- The appeals are allowed, and the impugned order is set aside.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals and granting all consequential reliefs to the appellants. The judgment emphasized the lack of concrete evidence and legal basis for the Revenue's claims, leading to the dismissal of demands for Modvat credit recovery, short payment of duty, and penalties.

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