2003 (1) TMI 696 - AT - Central Excise

Summary

Issues Involved:

1. Validity of MODVAT Credit on non-recommended grades of HDPE granules.
2. Imposition of personal penalty on the partner of the appellant company.
3. Alleged suppression of facts by the appellants and the applicability of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Validity of MODVAT Credit on non-recommended grades of HDPE granules:

The Commissioner of Central Excise disallowed the MODVAT Credit on the grounds that the appellant used non-recommended grades of HDPE granules to manufacture pipes, which did not conform to the Department of Telecommunication (DOT) specifications. The appellant contended that the HDPE Pipes were manufactured by blending various grades of granules to meet the DOT specifications. They provided letters from manufacturers like Reliance Industries Ltd. and Indian Petrochemicals Corporation Ltd., certifying that blending different grades of HDPE granules can produce pipes conforming to the required specifications. The appellant also highlighted that the Central Institute of Plastics Engineering & Technology (CIPET) confirmed that blending different grades could meet the DOT specifications. The Tribunal found no evidence from the Department that the granules purchased by the appellant were sold in the market or that the granules used were from non-duty-paid sources. The Tribunal concluded that the Department's case was based on assumptions and conjectures without any concrete evidence. Therefore, the MODVAT Credits taken by the appellants were valid.

2. Imposition of personal penalty on the partner of the appellant company:

The Commissioner imposed a personal penalty of Rs. 5,00,000 on Mr. R.A. Khan, a partner of the appellant company, under Rule 209-A of the Central Excise Rules, 1944. The appellant argued that no penalty could be imposed on Mr. Khan as there was no evidence of his direct involvement in any contravention of the rules. The Tribunal agreed with the appellant, noting the absence of evidence indicating any violation by Mr. Khan. Consequently, the imposition of the personal penalty was deemed unjustified and was set aside.

3. Alleged suppression of facts by the appellants and the applicability of the extended period of limitation:

The Commissioner rejected the appellants' claim that the show cause notice was barred by limitation, alleging suppression of facts. The appellants argued that they had disclosed all relevant information in the RG-23, Part-I register and the RT 12 monthly Returns, and that the Central Excise Invoices and Bills of Entry were defaced by the Department. The Tribunal found that the appellants had openly purchased and used different grades of granules, submitted all necessary returns and documents, and there was no evidence of any suppression of facts. The Tribunal also noted that the final products were inspected and accepted by DOT, further supporting the appellants' transparency. Therefore, the Tribunal concluded that the demand was time-barred and the extended period of limitation was not applicable.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned order, and granted consequential reliefs to the appellants. The MODVAT Credits taken by the appellants were deemed valid, the personal penalty on the partner was set aside, and the demand was found to be time-barred due to the absence of any suppression of facts.