2007 (1) TMI 30 - AT - Central Excise

Cenvat/Modvat Alleged that appellants had takes modvat credit on Copper concentrate which is not received in their factory and accordingly duty and penalty demanded After considering all the fact authority decided that there is no suppression of fact and penalty and duty demanded were set aside

Summary

Issues Involved:
1. Admissibility of Modvat credit on inputs not received in the factory.
2. Limitation period for raising demand of duty.

Detailed Analysis:

1. Admissibility of Modvat Credit on Inputs Not Received in the Factory:

The appellants, manufacturers of Copper Anodes, imported copper concentrate and warehoused the goods, finding a shortage upon weighment compared to the bill of lading. They filed ex-bond bills of entry for clearing the goods and took credit of the entire amount of CVD paid. The department's scrutiny revealed that Modvat credit was taken on 1052 MTs of copper concentrate not received in the factory, leading to a show-cause notice demanding recovery of duty and imposition of penalties.

The appellants contended that the weight difference was due to evaporation during transit, handling, and storage, citing past Tribunal decisions where Modvat credit was allowed for small shortages due to natural causes. They referenced cases such as Jaypee Rewa Plant, Hindustan Lever Ltd., and P.K.P.N. Spinning Mills Ltd., where credit was allowed for shortages due to evaporation or loss of moisture.

The learned SDR argued that under Rule 57A and Rule 57G of the Central Excise Rules, 1944, Modvat credit was only admissible for inputs received and used in manufacturing. The SDR pointed out that the appellants filed an "empty" ex-bond bill of entry without actual receipt of input, which did not entitle them to credit.

The Tribunal found that Modvat credit of Rs. 15,38,297/- was taken on inputs not received in the factory. The appellants' explanations of evaporation and different weighment scales were deemed unconvincing. The Tribunal noted that the appellants did not provide evidence of copper concentrate's volatile nature. Therefore, on merits, the appellants did not have a case against the demands raised.

2. Limitation Period for Raising Demand of Duty:

The appellants argued that the department was aware of the relevant facts as weighments were made in the presence of Customs officers, and ex-bond bills of entry were assessed to duty by the proper officer. They cited the Apex Court's decision in Pushpam Pharmaceuticals Company, where it was held that omission by one party, known to both, did not constitute 'suppression.'

The Tribunal agreed with the appellants, stating that both the assessee and the department were aware of the relevant facts, and there was no case of 'suppression' of facts by the assessee. Consequently, the extended period of limitation was not invocable. The demand of duty was set aside as time-barred, and the penalties were also set aside.

Conclusion:

The impugned order was set aside, and the appeal was allowed based on the limitation issue, rendering the demand of duty and penalties time-barred.