2008 (3) TMI 545 - AT - Central Excise

Issues Involved:

1. Misuse of Modvat credit on Aluminium sheets/coils by M/s. Rao Insulating Company Limited (RIC).
2. Alleged non-receipt and improper utilization of Aluminium sheets/coils.
3. Admissibility of Modvat credit and compliance with Rule 57G of Central Excise Rules.
4. Limitation period for recovery of credit.
5. Imposition of penalties on RIC and its executives.

Issue-wise Detailed Analysis:

1. Misuse of Modvat credit on Aluminium sheets/coils by M/s. Rao Insulating Company Limited (RIC):

The Revenue alleged that RIC had wrongly availed Modvat credit amounting to Rs. 24,16,288/- by misdeclaring Aluminium sheets/coils as inputs for manufacturing Fluorescent Tube Light (FTL) caps and General Lighting Service (GLS) caps. It was found that these inputs were of varying thicknesses, unsuitable for the declared production, and were allegedly fabricated records to show receipt and usage.

2. Alleged non-receipt and improper utilization of Aluminium sheets/coils:

The Commissioner (Adj) examined the allegation that the impugned Aluminium sheets/coils were not received by RIC. The investigation revealed discrepancies in the Inter Division Transfer Register (IDTR) and the actual usage of these materials. However, the Commissioner found that the Show Cause Notice did not indicate the manner of disposal of the impugned goods if not used in production. The investigation also failed to ascertain the actual consumption of Aluminium sheets/coils based on input-output ratios.

3. Admissibility of Modvat credit and compliance with Rule 57G of Central Excise Rules:

RIC admitted using part of the Aluminium sheets/coils for maintenance purposes and claimed the rest was used as Entry/Backup sheets for PCB fabrication. The Commissioner found that RIC had not declared PCB as a final product before 1-3-1997 and had taken irregular credit without filing the required declaration under Rule 57G. However, the assessee had filed monthly returns under Rule 57G(8), which included details of credit availed.

4. Limitation period for recovery of credit:

The Commissioner noted that from 1-3-1997, credit could be availed on any finished goods regardless of the input usage, as per Rule 57F(12). Therefore, the demand notice issued on 3-6-1999 could not recover credits for a period beyond six months prior to its issue. The demand for Rs. 21,57,876/- was found to be barred by limitation as the relevant particulars had been filed in statutory returns.

5. Imposition of penalties on RIC and its executives:

The Commissioner confirmed the demand of Rs. 2,58,412/- for materials used for maintenance and imposed a penalty of Rs. 46,581/-. However, penalties against S/Shri G.V.S. Pavan, B.S. Murthy, and John Kuruvilla were dropped due to lack of evidence of their involvement. The Revenue's appeal argued that the Commissioner ignored key evidence, including the statements of the transporter and stores in-charge. The Tribunal found no reason to interfere with the Commissioner's order, as the demand was barred by limitation and penalties were not justified.

Conclusion:

The Tribunal upheld the Commissioner's order, finding that the Revenue failed to establish the irregular availment of Modvat credit with sufficient evidence. The demand for Rs. 21,57,876/- was barred by limitation, and penalties against the executives were not warranted. The appeal by the Revenue was dismissed.

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