2006 (2) TMI 339 - AT - Central Excise

Summary

Issues:
- Availing Modvat credit on invalid invoices
- Discrepancy in goods received and description in invoices
- Imposition of penalty under Rule 173Q
- Time-barred demand for recovery

Analysis:
- The case involved appeals against Orders-in-Appeal passed by the Commissioner of Central Excise (Appeals) Bangalore, where the appellants were found to have availed Modvat credit on invalid invoices issued by M/s. Bellary Steel and Alloys Ltd. (BSAL). The invoices misdeclared the description of goods, leading to a discrepancy between the goods received and those described. The Addl. Commissioner disallowed the Modvat credit and imposed a penalty under Rule 173Q, which was upheld by the Commissioner (Appeals) but with reduced penalties. The appellants challenged these findings, leading to the appeal before the Tribunal for relief.

- The appellants argued that they received billets of size 100 x 100 mm directly from BSAL, not 125 x 125 mm as alleged. They contended that they had been regular purchasers from BSAL, with proper documentation and payment through banking channels. They claimed to have satisfied the conditions stipulated under Rule 173Q regarding the identity and address of the supplier. The appellants emphasized that there was no collusion, wilful misstatement, or suppression of facts on their part. They also highlighted that the demand for recovery was time-barred, as the goods were received in August 1995, while the show cause notice was issued in 2000.

- The Tribunal noted that the goods were actually purchased from BSAL, who had followed a peculiar procedure to keep their dealings with another supplier a trade secret, resulting in BSAL paying more duty than availed through Modvat. The Tribunal considered the lack of revenue loss, as evident in the Final Order passed in BSAL's case. Despite the Balmer Lawrie decision stating Modvat cannot be availed on invalid documents, the Tribunal found that the appellants were not at fault for BSAL's irregular procedures. The Tribunal concluded that the appellants had not committed any contumacious act warranting a penalty, given the duty paid nature of the goods and the absence of revenue loss. Therefore, the appeals were allowed with consequential relief.

- In the final judgment pronounced on 6-2-2006, the Tribunal considered the peculiar circumstances of the case, the lack of contumacious acts by the appellants, and the absence of revenue loss to justify allowing the appeals and providing relief to the appellants in the matter of availing Modvat credit on allegedly invalid invoices.