1997 (7) TMI 362 - AT - Central Excise

Issues Involved:
1. Denial of Modvat credit on inputs supplied by M/s. IPCL.
2. Validity of duty paying documents.
3. Timeliness of the show cause notice.
4. Imposition of penalty.

Detailed Analysis:

1. Denial of Modvat Credit on Inputs Supplied by M/s. IPCL:
The appellants, engaged in the manufacture of polythene film, purchased granules from M/s. IPCL. The Department, upon scrutinizing the RT-12 Return, found certain deficiencies and irregularities, leading to the issuance of two show cause notices. The Additional Collector confirmed the demand of Rs. 5,10,270.35 and a penalty of Rs. 12.00 lakh in one case, and Rs. 7,71,707.00 as duty and Rs. 12,00,000/- as penalty in the other case. The Collector (Appeals) upheld the order, prompting the appellants to appeal.

2. Validity of Duty Paying Documents:
The Department's main contention was that the certificates issued by M/s. IPCL did not have printed serial numbers and were issued much later than the date on which the inputs were received. The appellants argued that the certificates did have serial numbers filled by hand and that the prescribed form did not mandate pre-printed serial numbers. They also explained that the goods were first received by IPCL's regional office in Delhi, then transferred to their consignment agent in Kanpur, and finally supplied to the appellants. The duty-paying certificates were issued periodically, indicating the various delivery challans against which the material was supplied. The appellants made entries in RG 23A Part I upon receipt of the goods and took credit in RG 23A Part II only after receiving the duty-paying certificates. The Tribunal found the appellants' explanations satisfactory and in accordance with Rule 57G, which allowed Modvat credit even if duty-paying documents were received later.

3. Timeliness of the Show Cause Notice:
For Appeal No. E/522/95, the show cause notice dated 3-1-1992 was issued beyond six months from the date of taking credit, which was 4-6-1991. The appellants argued that there was no allegation of suppression or mis-statement of facts in the show cause notice, making the extended period inapplicable. The Tribunal agreed, citing the Supreme Court ruling in M/s. H.M.M. Limited, which stated that the extended period could not be invoked without specific allegations. Thus, the demands indicated at Sl. No. 1 to Sl. No. 7 of the show cause notice were time-barred. However, for Sl. No. 8, the credit taken on 17-8-1991 was within the permissible period, and the Tribunal found no reason to disallow the credit as it was supported by a certificate for 6 MT, despite the receipt of 13 MT.

4. Imposition of Penalty:
The appellants did not contest items against Sl. Nos. 1 and 2 of the show cause notice dated 20-4-1992, and the penalty was imposed for excess credit taken of Rs. 270/- and another demand entailing voluminous documents. The Tribunal, considering the totality of the facts and circumstances, reduced the penalty to Rs. 10,000/- in Appeal No. E/524/95-NB and set aside the penalty in Appeal No. E/522/95-NB.

Conclusion:
The Tribunal modified the impugned orders, allowing Modvat credit for Sl. Nos. 3 and 4 in the show cause notice dated 20-4-1992 and Sl. No. 8 in the show cause notice dated 3-1-1992. The penalties were reduced or set aside accordingly, with consequential relief to be granted in accordance with the law.

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