2005 (10) TMI 194 - AT - Central Excise

Validity of second SCN issued by invoking extended period of limitation - Held that - on the basis of same investigation, the second SCN by invoking extended period is not sustainable - appeal allowed.

Summary

Issues:
- Time-barred show cause notice
- Availment of Modvat credit on paper transaction
- Allegations of not receiving 'MS scrap'

Analysis:

1. Time-barred show cause notice:
The appellant argued that the show cause notice issued to them was time-barred and not in line with established legal principles. The appellant contended that they were unaware of any discrepancies in the duty paying documents prepared by the seller. The appellant also emphasized that they had physically received the MS scrap from the seller, refuting the allegation that they had not received the goods. The appellant's counsel highlighted that the impugned order suffered from legal infirmities due to the time-barred nature of the show cause notice.

2. Availment of Modvat credit on paper transaction:
The Department's representative argued that the appellant was fully aware that they were availing credit based on a paper transaction without actually receiving the inputs. This assertion was supported by discrepancies in the description of goods on the seller's invoice copies. The Department contended that the seller might have procured substandard scrap from the market and dispatched it to the appellant. Additionally, the Department maintained that the investigation was ongoing during the issuance of the show cause notice, justifying its timely nature.

3. Allegations of not receiving 'MS scrap':
Upon reviewing the submissions from both sides and examining the records, the Tribunal noted that the appellant had been issued a show cause notice in 1999 for availing credit in 1995. The Tribunal observed that during 1996, it was evident that the appellant had received wrong credit transferred by the seller. The Tribunal found that the authorities had been negligent in not issuing a show cause notice to the appellant in 1996 itself. Referring to a precedent, the Tribunal concluded that the show cause notice issued in 1999 was void and unsustainable due to the completion of investigations in 1996 without any further action against the appellant.

In conclusion, the Tribunal set aside the order of the Commissioner (Appeals) and allowed the appellant's appeal, granting consequential relief. The judgment highlighted the importance of timely issuance of show cause notices and upheld the legal principle that demands based on time-barred notices are not sustainable. The decision emphasized the need for thorough investigations and adherence to legal procedures to ensure the validity of enforcement actions in excise matters.