2006 (7) TMI 483 - AT - Central Excise

Demand duty - disallowance of Modvat credit - inputs under the invoices - setting aside of the penalties imposed u/s 11AC - HELD THAT - I find from the records that the lower authorities have confirmed the demand of the duty based on the fact that the one of the truck which purportedly transported the inputs was registered for agriculture work. In the absence of any such findings it is leads to an inference that the other three trucks did carry inputs to the appellant s factory. Further I find that the appellant has adduced enough evidence in form of weighbridge slips Consignment notes of the transporters etc. The revenue has not placed any evidence contrary in the form of statement of the transporters or weighbridge owner to refute the appellant s claim. This in itself would indicate that the inputs were in fact transported to the appellant. The overwhelming evidences brought on record by the appellant are to suggest that the inputs were received in the factory of the appellant. Hence on merits the appellant s appeal succeeds and demand of duty is unsustainable. The revenue is not disputing the fact that the appellant had filed the RT 12 returns with the authorities if that be so then the lower authorities should have before assessing the returns made enquiries as to the consumption of the inputs and manufacturing of the finished products. The authorities having failed to do so and detect the non-receipt of the inputs on such examination cannot now turn around and say there were suppression mis-statement and fraud. Hence on the limitation also the appellants have demonstrated that the demand is not sustainable. As the demand is not sustainable on merits and as well as on limitation the impugned order is set aside and appeal of the appellant is allowed while the appeal filed by the revenue is dismissed. Ordered accordingly.

Summary

Issues:
Appeal against penalties under section 11AC and disallowance of Modvat credit.

Analysis:
The case involved two appeals against an order in appeal dated May 20, 2004, with one appeal by the revenue and the other by the assessee. The revenue appealed against the setting aside of penalties under section 11AC, while the assessee appealed against the disallowance of Modvat credit. Both appeals were disposed of by a common order due to the same issue arising from the original order.

The appellant had availed Modvat credit in July 1995 based on invoices from a supplier. However, an investigation revealed that the invoices were issued only for availing the credit, and no actual inputs were supplied. A show cause notice was issued in August 2000 to recover the Modvat credit. The appellant contested the notice on grounds of limitation and merits. The adjudicating authority confirmed the demand and imposed penalties under section 11AC and rule 173Q. The Commissioner (Appeals) upheld the duty confirmation and penalty under rule 173Q but set aside the penalty under section 11AC and interest under section 11AB, leading to appeals by both parties.

The appellant argued that the show cause notice was time-barred since the credit was availed in 1995, while the notice was issued in 2000. They provided RT 12 returns, invoices, and other records for verification since 1998. The revenue contended that the appellant did not receive the inputs and availed credit based only on documents. They invoked an extended limitation period due to suppression, misstatement, and fraud. The appellant presented evidence like weighbridge slips and consignment notes to prove receipt of inputs.

Upon considering the submissions and evidence, the Tribunal found that the lower authorities confirmed duty denial based on a truck registered for agriculture work, without assessing its capability to transport inputs. Lack of findings on other trucks indicated inputs were transported. The appellant's evidence, unrefuted by the revenue, suggested receipt of inputs. The Tribunal ruled in favor of the appellant on merits, stating the demand was unsustainable.

Regarding limitation, the Tribunal noted the appellant's compliance with RT 12 returns and criticized the authorities for not verifying input consumption before alleging suppression, misstatement, and fraud. As the demand was unsustainable on both merits and limitation, the impugned order was set aside, allowing the appellant's appeal and dismissing the revenue's appeal.