2005 (9) TMI 559 - AT - Central Excise

Summary

Issues:
- Appeal against order in appeal passed by the Commissioner (Appeals) regarding denial of modvat credit based on gate passes issued by non-existent firms.
- Contention of the appellants regarding purchase of goods, payment via cheques, and utilization of inputs in the manufacture of final products.
- Revenue's argument of non-existence of the manufacturer and supplier, leading to denial of credit.
- Adjudication of penalty imposition based on active knowledge of non-existence of the manufacturer and payment made via cheques.

Analysis:

The appellant filed an appeal against the order passed by the Commissioner (Appeals) concerning the denial of modvat credit. The case revolved around the appellant's availing of credit based on gate passes issued by M/s. Girish Chemicals and endorsed by M/s. Medison Pharmaceuticals, which were later alleged to be non-existent firms. The adjudicating authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals).

The appellants contended that they purchased goods from M/s. Medison Pharmaceuticals, made payments through cheques, and utilized the inputs in the manufacture of final products. They argued that the goods were duly recorded in their statutory records and used in production, thus justifying the credit availed. The crux of their defense was the lack of evidence showing procurement of inputs from sources other than those mentioned in the gate passes.

On the other hand, the Revenue contended that both M/s. Girish Chemicals and M/s. Medison Pharmaceuticals were non-existent entities, casting doubt on the legitimacy of the documents used to claim credit. They argued that the documents were fabricated to exploit the modvat scheme, as evidenced by the non-existence of the firms mentioned in the gate passes.

The Tribunal found that the gate passes (GP-I) used by the appellants to claim credit were indeed issued by non-existent firms, indicating that no duty had been paid as per the documents. Consequently, the appellants were deemed ineligible for the credit based on such unreliable documentation. However, regarding the imposition of the penalty, the Tribunal noted that while the appellant had knowledge of the non-existence of the manufacturer, there was no evidence to suggest that the cheque payments made were returned. As a result, the penalty imposed on the appellant was deemed unsustainable and was set aside, leading to the disposal of the appeal in favor of the appellant on this particular issue.