1997 (9) TMI 225 - AT - Central Excise

Summary

Issues:
1. Admissibility of deemed Modvat credit
2. Invocation of longer period for demand
3. Compliance with Rule 57G(2) and Proviso to Section 11A

Admissibility of deemed Modvat credit:
The case involved the appellants engaged in the manufacture of various aluminum products who were availing themselves of deemed Modvat credit on aluminum scrap procured from the Government of India Mint. The Department alleged that the deemed Modvat credit was not admissible, leading to a demand of Rs. 6,52,499. The Collector of Central Excise disallowed the Modvat credit and imposed a personal penalty. The appellants challenged this decision, arguing that the demand was beyond the six-month period, and key ingredients like fraud, collusion, suppression, or misstatement were not alleged in the show cause notice (SCN). The appellants relied on previous court decisions emphasizing the necessity of indicating such ingredients in the SCN to enable rebuttal. The absence of allegations of suppression or misstatement, coupled with the Department's awareness of the procurement of aluminum sheets, led to the conclusion that the demand was time-barred.

Invocation of longer period for demand:
The appellants contended that the Proviso to Section 11A, allowing for a longer period in certain cases, was not invoked in their situation. They argued that since there was no allegation of fraud, collusion, suppression, or misstatement in the SCN, the longer period should not apply. The appellants highlighted that the Department was fully aware of the procurement activities, and the RT 12 returns were duly assessed. The absence of specific allegations in the SCN regarding the key ingredients required for invoking a longer period supported the appellants' position that the demand was beyond the statutory limitation period.

Compliance with Rule 57G(2) and Proviso to Section 11A:
The Department, represented by the ld. SDR, pointed out a contravention of Rule 57G(2) and argued that the Proviso to Section 11A allowed for a longer period in cases of rule contravention. However, the Tribunal noted that the contravention of Rule 57G(2) was not established, and the key ingredients of fraud, collusion, suppression, or misstatement were absent in the SCN. The Tribunal emphasized that the only way to invoke a longer period was by indicating these ingredients in the notice. Since the allegations were not present, the demand was held to be time-barred, and the appeal was allowed with consequential relief as per the law.

In conclusion, the judgment focused on the admissibility of deemed Modvat credit, the invocation of a longer period for demand, and compliance with relevant rules and provisions. The Tribunal ruled in favor of the appellants, emphasizing the importance of including specific allegations in the show cause notice to enable a fair rebuttal and upholding the statutory limitation period.