2002 (11) TMI 169 - AT - Central Excise

Summary

Issues involved: Whether Modvat credit is to be disallowed to appellants due to supplier's fake invoices.

Summary:
In the 12 appeals before the Appellate Tribunal CEGAT, New Delhi, the common issue was whether Modvat credit should be disallowed to the appellants based on the supplier's use of fake and bogus invoices. The Commissioner disallowed the Modvat credit amount and ordered recovery from the buyers, without imposing penalties on the appellants. The appellants argued that they were not actively involved in the supplier's fraud and should not be penalized. They also contended that since they received goods with duty particulars, Modvat credit should not be denied. The Revenue argued that since the supplier did not pay duty, the goods supplied to the appellants were non-duty paid, thus no credit should be availed. The Revenue also claimed that extended limitation period applies due to the supplier's fraud.

The Tribunal considered both sides' submissions and noted that the Revenue did not dispute the receipt of goods by the appellants under duty-paying invoices. As the appellants purchased dutiable goods with proper documentation, Modvat credit could not be denied. The Tribunal also observed that there was no evidence of fraud or misconduct by the appellants, as confirmed by the Commissioner. Rule 57-I of the Central Excise Rules was referenced, stating that the extended limitation period applies only when fraud is committed by the party against whom the notice is issued. Since the appellants were not involved in any fraudulent activities, the disallowance of Modvat credit and recovery from them was set aside, and all appeals were allowed.