2011 (3) TMI 1130 - AT - Central Excise

Penalty and interest - cenvat credit disallowed - assessees were required to enter the receipt of those goods in their RG-23D register and issue necessary invoices at the time of clearance of those goods from the assessees depot to be transported to the factory premises of M/s Hero Cycles Limited but they failed to make such entry as well as to issue such invoices and, therefore, the goods were liable to be confiscated and penalty was imposable in terms of Rule 209A of the erstwhile Central Excise Rules, 1944 - Held that - As in the case in hand, the assessees never intended to issue any modvatable invoice nor to pass any credit and in fact they themselves had not availed the credit in respect of goods in question. This was not only the defence of the assessees but it is an undisputed fact as it is not the case of the department that the assessees had availed any credit in respect of duty paid on such goods or that any attempt was made to pass on credit by the assessees. There is neither a case of any clandestine removal of the goods in the course of transportation thereof, nor it is a case of mere issuances of invoices without goods having accompanied and in these circumstances, we do not found any case having been made out for taking action in terms of Rule 209A. The findings arrived at by the Commissioner (Appeals) that the goods were liable for confiscation is clearly not born out from the record and are not sustainable.

Issues Involved:
1. Disallowance of Modvat credit.
2. Requirement of entry in RG-23D register and issuance of invoices.
3. Justification for confiscation of goods and imposition of penalty.
4. Applicability of Circular No. 96/7/95-CX dated 13.02.1995.
5. Relevance of case laws cited by both parties.

Detailed Analysis:

1. Disallowance of Modvat Credit:
The lower appellate authority modified the adjudicating authority's order by reducing the penalty from Rs. 38 lakh to Rs. 2 lakh. The Additional Commissioner had disallowed Modvat credit amounting to Rs. 37,55,264/- and ordered recovery of interest along with an equal amount of penalty. The assessees, registered dealers for trading in excisable goods, were involved in the transportation of goods from M/s Essar Steels Limited to M/s Hero Cycles Limited.

2. Requirement of Entry in RG-23D Register and Issuance of Invoices:
The department argued that the assessees were required to enter the receipt of goods in their RG-23D register and issue necessary invoices when clearing goods from their depot to M/s Hero Cycles Limited. The failure to do so made the goods liable for confiscation and penalty under Rule 209A of the Central Excise Rules, 1944. The assessees contended that they were not required to enter the details in RG-23D register as per Circular No. 96/7/95-CX dated 13.02.1995, specifically clause 9 (c), which exempts the requirement if no modvatable invoices are to be issued.

3. Justification for Confiscation of Goods and Imposition of Penalty:
The authorities held the assessees responsible for non-issuance of invoices and failure to make entries in the RG-23D register, stating that the goods were received in the depot, thus necessitating compliance with the law. The assessees maintained that the goods were merely in transit and not consigned to them, hence no entry or invoice issuance was required. The appellate authority found no justification for fastening duty liability on the assessees as they neither availed credit nor issued any invoices under Rule 57GG.

4. Applicability of Circular No. 96/7/95-CX dated 13.02.1995:
The circular clarified that a registered person need not enter details in the RG-23D register for consignments received under Rule 52A or 57G invoices if they do not propose to issue modvatable invoices. The appellate authority noted that the assessees did not intend to issue modvatable invoices or pass any credit, and this was undisputed as the department did not claim that the assessees availed any credit or attempted to pass it on to M/s Hero Cycles Limited.

5. Relevance of Case Laws Cited by Both Parties:
The department cited Indian Aluminium Company Limited vs. Thane Municipal Corporation and U.K. Enterprises vs. Commissioner of C. Ex. Goa to argue the necessity of compliance with procedural requirements. The appellate authority distinguished these cases, noting that they pertained to mandatory requirements for claiming exemption benefits, which was not applicable in the present case as the assessees did not claim any benefit from the transaction. The assessees cited Commissioner of C. Ex. Chandigarh vs. Sangam Sales Corporation and Chandan Chemicals vs. Commissioner of Central Excise, Allahabad to support their position on non-requirement of entries in RG-23D register.

Conclusion:
The appellate authority quashed the impugned order, holding that the findings of the Commissioner (Appeals) regarding the liability for confiscation were not supported by the record. Consequently, the penalty imposed was also set aside. The appeal filed by the department was dismissed, and the assessees were granted consequential relief. The authority emphasized that since the assessees did not claim any benefit or pass on any credit, there was no basis for the action taken against them.

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