2004 (8) TMI 223 - AT - Central Excise

Cenvat/Modvat - Receipt of inputs in the factory (ship-breaking scrap) - mis-declaration - Demand - Limitation - Evidence - Proof - Penalty - Competence of the authority issuing the show cause notice - HELD THAT - It is not the appellant's case that even such ledger and registers were destroyed in the fire. The fact that the inputs in the form of ship-breaking scrap was entered in RG 23A, Part-I does not establish that the goods were received in the factory. At least two truck owners have categorically denied having transported any goods to the appellant. The plea that the truck owners indulged in mal-practices and run them with false numbers is farfetched. In the appellants case 99 vehicles were such that they could not have carried the goods from the supplier to the buyer, some of the numbers belonged to auto-rickshaws, motorcycles and some numbers did not exist. The fact that out of the list of vehicles which were shown to be tankers, according to RTOs Office, two vehicles turned out to be regular carriers of goods does not establish that the case of other vehicles also it was true. An exception cannot make a rule. Once it is established that the input has not been transported in the vehicle mentioned in the invoice it is but reasonable to say that the inputs were not received in the factory as required under Rule 57G. The Commissioner as well as the ld. SDR relied on the case of A.N. Guha Co. cited supra wherein the Tribunal held that it is not necessary for the department to establish a fact with mathematical precision once a presumption as to the existence of a fact is raised against an assessee. This test is satisfied in the present case. We hold that allegation of mis-declaration is established inasmuch as the appellants took credit of duty paid on the inputs which were not received in the factory. Thus the entries made in the RG 23A, Parts-I and II are false. In such a situation extended period can be invoked for denying Modvat credit. The ld. Advocate contended that Section 11AC is not invokable when Modvat credit is dis-allowed. We observe that recovery of credit wrongly availed of or utilised in an irregular manner is provided under Rule 57-I. The Commissioner invoked Rule 57-I(4) and Rule 57AH(2) of the Central Excise Rules read with Section 11 AC for imposing a penalty of equal amount of credit dis-allowed. We see no infirmity in this regard. Interest under Section 11 AB goes, we observe that interest is chargeable as per provisions of that Section. In regard to the penalty imposed on the Chairman-cum-Managing Director, we observe that he was involved in day-to-day affairs of the company. His statements on different dates also reveal that he was conversant with the issues involved. A penalty under Rule 209A of Central Excise Rules can be imposed on an employee of the firm he was knowingly concerned with evasion of duty. Suppliers of the inputs are concerned, we observe that the responsibility of supplying goods to the consignee whose address is given on the invoices is cast on them. By mentioning vehicle numbers which do not exist and which are not goods carriers the appellants rendered themselves to penalty u/s 209A of the Central Excise Act. When they were asked to explain the discrepancies in the invoices in regard to the vehicle numbers they have uniformly replied that they had nothing to say. Penalty - In the present case the allegation is non-receipt of input into the factory and the consequent non-availability of credit. The appellants contend that part of the goods in the form of billets and rods produced by them were exported out of the country. It is also brought out that the appellant's record of production or final products is genuine. Having regard to this we hold that the present case does not warrant 100% penalty under Section 11AC. We therefore, reduce the penalty imposed under this Section to Rs. 6 lakhs, (Rupees six lakhs only). Having regard to the role played by the Chairman-cum-Managing Director of the appellant company we reduce the penalty to Rs. 50,000/-. Thus the appeal by M/s. VAL and its Managing Director are partly allowed. The appeals of the suppliers of the scrap are rejected. The demand for reversal of Modvat credit taken to the tune of Rs. 24,83,793/- is confirmed.

Summary

Issues Involved:
1. Receipt of inputs in the factory.
2. Validity of Modvat credit availed.
3. Imposition of penalties and interest.
4. Competence of the authority issuing the show cause notice.

Summary:

1. Receipt of Inputs in the Factory:
The primary issue was whether M/s. Viraj Alloys Ltd. (VAL) received the inputs (ship-breaking scrap) in their factory. The Department's investigation revealed that the vehicle numbers listed in the modvatable invoices were of non-transport vehicles like motorcycles, auto-rickshaws, etc. The suppliers confirmed that the vehicles were provided by the purchaser (VAL). The Department concluded that the inputs were not received in the factory based on RTO verification reports and statements from vehicle owners denying transportation of goods to VAL.

2. Validity of Modvat Credit Availed:
The Department disallowed Modvat credit amounting to Rs. 24,83,793/- u/r 57-I (1) (ii) of the Central Excise Rules read with Section 11A(2) of the Central Excise Act, 1944, as the inputs were not received in the factory. The appellant argued that they maintained proper records and the Department did not dispute the manufacture and clearance of final products on payment of duty. However, the Tribunal held that the non-receipt of inputs was established, and thus, the Modvat credit was rightly denied.

3. Imposition of Penalties and Interest:
An equal amount of penalty was imposed on VAL u/r 57-I (4) of the Central Excise Rules read with Section 11AC of the Act. A penalty of Rs. 6,50,000/- was imposed on the Chairman-cum-Managing Director u/r 209A of the said Rules read with Rule 26 of Cenvat Credit Rules, 2001/2002. Interest u/s 11AB was also demanded. The Tribunal reduced the penalty on VAL to Rs. 6 lakhs and on the Chairman-cum-Managing Director to Rs. 50,000/-, considering the genuineness of the production records and partial export of goods.

4. Competence of the Authority Issuing the Show Cause Notice:
The appellant contended that the show cause notice issued by the Additional Director General of DGCEI was invalid. However, the Tribunal held that the ADG of DGCEI was competent to issue such a notice.

Conclusion:
The Tribunal confirmed the demand for reversal of Modvat credit taken to the tune of Rs. 24,83,793/-. The appeals of the suppliers of the scrap were rejected. The penalties on VAL and its Managing Director were reduced, and the appeal was partly allowed.