1996 (7) TMI 337 - AT - Central Excise

Summary

Issues Involved:
1. Availment of Modvat credit on Cardboard Cartons without actual duty payment.
2. Validity of the show cause notice issued under Rule 57-I of the Central Excise Rules, 1944.

Issue 1: Availment of Modvat credit on Cardboard Cartons without actual duty payment:
The appellants, engaged in manufacturing Explosives, received Cardboard Cartons from a supplier, M/s. Ranchi Packaging Enterprises, and claimed Modvat credit for duty paid on 21 consignments. Subsequently, it was discovered that the duty payment entries on the Gate Passes were fake, and no excise duty had actually been paid. The Tribunal found that the suppliers did not pay excise duty on the Cartons, making the Modvat credit invalid. Despite the initial justification for availing the credit, the appellants were required by law to reverse the credit due to the non-payment of duty by the suppliers.

Issue 2: Validity of the show cause notice issued under Rule 57-I of the Central Excise Rules, 1944:
The appellants contended that the show cause notice, issued under Rule 57-I, was time-barred as it was served long after the six-month period stipulated by the rule. The Collector's order alleged wilful misstatement, collusion, or suppression of facts by the appellants, justifying the longer limitation period of five years. However, the Tribunal found no evidence of such misconduct by the appellants. The suppliers had received payment for the Cartons, including the duty amount, indicating no collusion to evade duty. As a result, the proviso to Rule 57-I(1) extending the limitation period was deemed inapplicable, leading to the conclusion that the show cause notice was indeed barred by limitation.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.