2007 (8) TMI 174 - AT - Central Excise

Credit availed on returned goods on basis of supplementary invoices Further clearances on short payment of duty can not be attributed to suppression of facts when proper records have been maintained of returned goods No clandestine removal so demand raised in SCN after two years is time-barred

Summary

Issues:
Modvat credit denial based on supplementary invoices issued by the holding company due to duty short paid by the manufacturer.

Analysis:
The appellant availed Modvat credit based on supplementary invoices from their holding company, which were denied due to duty short paid by the manufacturer. The holding company, engaged in optical fiber manufacturing, had initially cleared goods to a buyer who returned them, leading to duty payment discrepancies. The Central Excise authorities required the manufacturer to reverse the credit, resulting in the issuance of supplementary invoices to the appellant. The appellant availed the credit in December 2001, reflecting it in their returns with supporting documents. Despite a visit by officers and clarification from the appellant in 2002, a show cause notice was issued in 2004, beyond the limitation period.

The Revenue argued suppression by the appellant for not disclosing the basis of credit in their returns and justified the delayed notice issuance due to prolonged investigations. However, the Tribunal found no suppression or fraudulent intent by the manufacturer in paying short duty, as the goods' return and duty credit were duly recorded. The discrepancy arose from a lower duty payment at the time of clearance to the appellant. The Tribunal emphasized that the case involved legal interpretation rather than clandestine activities, supporting the appellant's credit availing based on supplementary invoices. The appellant's authorized signatory's statement and timely filing of returns further demonstrated transparency.

Concluding the analysis, the Tribunal set aside the order, allowing the appeal and granting consequential relief to the appellants. Penalties were also revoked. The decision highlighted the absence of suppression and the appellant's compliance with record-keeping and reporting requirements, ultimately leading to the favorable judgment.