2015 (5) TMI 23 - AT - Central Excise

Undervaluation of goods - Demand of differential duty - Held that - Appellant had no knowledge that the input suppliers were not registered with the Central Excise Authorities. The appellant during the investigation, categorically stated that they received the goods accompanied with Central Excise invoice and duty recorded in Cenvat Register. It is further evident from record that inputs were utilized in the finished goods, cleared on payment of duty. There is no material available that the appellant was party to the fraud and the decision of the Hon ble High Court is applicable in this case. - Regarding the demand of ₹ 14,266/-, the appellant cleared 4953.400 kg of plastic scraps/waste to Milan Plastics under the cover of Central Excise invoice showing the value of goods of ₹ 52,011/- and paid Central Excise duty of ₹ 8,322/-. It has been alleged in the show cause notice that during the investigation, the officers found a chit paper that the appellant received a payment of ₹ 1,41,142/- from Milan plastics for the goods cleared under the said invoices. The appellant in reply to show cause notice took a stand before the Adjudicating Authority that the said paper would not reveal the clearance of goods in respect of the said invoices. It is stated that the figures mentioned in the rough paper pertained to cash received by the appellant factory from their office for disbursement to the employees. There is no indication undervalue of sales of scraps. The appellant requested the adjudicating authority to produce the seized documents at time of hearing to reveal the truth. The appellant also took same ground before the Commissioner (Appeal). Both the authorities below failed to examine the seized documents. Taking into account of the amount involved and the appeal is old one, there is no reason to remand the matter on issue and the benefit of doubt goes in favour of the assessee. - demand of duty alongwith interest is held barred by limitation - Decided in favour of assessee.

Issues Involved:

1. Denial of Cenvat credit of Rs. 44,10,384/- on the basis of bogus invoices.
2. Demand of differential duty of Rs. 14,266/- for undervalued clearance of plastic scrap/waste.
3. Imposition of penalties on the Managing Director and Authorized Signatory of the appellant company.
4. Application of extended period of limitation for the demand of duty.
5. Validity of the demand under Rule 57I of the Central Excise Rules.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit of Rs. 44,10,384/- on the Basis of Bogus Invoices:

The appellant was accused of availing Cenvat credit on the basis of invoices issued by non-existent firms. The adjudicating authority confirmed the demand along with interest and imposed penalties. The appellant argued that the credit was availed based on invoices issued by registered manufacturers/dealers, which were verified and defaced by the Superintendent of Central Excise. They contended that there was no material irregularity on their part and relied on various judicial decisions to support their case. The Tribunal found that the appellant had acted in a bona fide manner, and there was no evidence that they were aware of the non-existence of the suppliers. It was noted that the invoices contained all necessary information, and the initial verification by the Superintendent supported the appellant's claim.

2. Demand of Differential Duty of Rs. 14,266/- for Undervalued Clearance of Plastic Scrap/Waste:

The show cause notice alleged that the appellant undervalued the clearance of plastic scrap/waste based on a chit paper found during the investigation. The appellant argued that the figures on the chit paper pertained to cash received for employee disbursements and not for the sale of scraps. The adjudicating authority and the Commissioner (Appeals) failed to examine the seized documents. The Tribunal, considering the amount involved and the age of the appeal, gave the benefit of doubt to the appellant and set aside the demand.

3. Imposition of Penalties on the Managing Director and Authorized Signatory of the Appellant Company:

Penalties were imposed on the Managing Director and the Authorized Signatory under Rule 209A of the Central Excise Rules, 1944, and Rule 26 of the Central Excise Rules, 2002. The Tribunal, after setting aside the demand of duty, also set aside the penalties imposed on these individuals.

4. Application of Extended Period of Limitation for the Demand of Duty:

The appellant argued that the demand was barred by limitation as there was no material irregularity on their part. They relied on the decision of the Hon'ble High Court of Gujarat in the case of Prayagraj Dyeing and Printing Mills Pvt. Ltd., which held that the extended period of limitation could not be invoked in the absence of any fraud or willful misstatement by the appellant. The Tribunal agreed with the appellant, noting that there was no evidence of their involvement in any fraud, and thus, the demand was barred by limitation.

5. Validity of the Demand under Rule 57I of the Central Excise Rules:

The appellant contested the demand under Rule 57I, arguing that the rule was not in existence at the time of the issuance of the show cause notice. The Tribunal did not delve into the merits of this argument, as the demand was already set aside on the grounds of limitation and lack of evidence.

Conclusion:

The Tribunal set aside the demand of duty of Rs. 44,10,384/- along with interest, the differential duty of Rs. 14,266/- along with interest, and the penalties imposed on the Managing Director and Authorized Signatory. The appeals filed by the appellants were allowed, and the miscellaneous applications were disposed of without going into the merits. Applications for the extension of the stay order were dismissed as infructuous.

← Previous Next →