1996 (10) TMI 311 - AT - Central Excise

Summary

Issues:
1. Whether the appellants are liable to reverse Modvat credit on inputs declared under Rule 57G for Modvat purposes?
2. Whether the department's invocation of the longer period under Rule 57-I for recovery of duty and penalty is justified?
3. Whether the appellants suppressed facts by not verifying if the inputs received had suffered duty before claiming deemed Modvat credit?

Analysis:
1. The appellants, engaged in manufacturing steel structures, availed Modvat credit on inputs, including unwrought Zinc. The department found that zinc ingots received from small scale units were exempted from duty. The department initiated proceedings against the appellants for reversal of Modvat credit amounting to Rs. 99,898 under Rule 57-I. The Commissioner ordered recovery of duty and imposed a penalty under Rule 173Q. The appellants argued they did not suppress facts, as invoices were produced to the department, which were duly defaced. The Tribunal noted the exemption of inputs from duty and upheld the department's decision, rejecting the appeal.

2. The department invoked the longer period under Rule 57-I for recovery of duty and penalty, alleging suppression of facts by the appellants. The appellants contended they did not suppress any facts and had provided invoices to the department. The department argued that the appellants should have verified if the inputs had suffered duty before claiming deemed Modvat credit. Citing precedents, the department emphasized the duty to establish the duty paid nature of inputs for claiming deemed Modvat credit. The Tribunal considered both arguments and upheld the department's decision, stating that the appellants should have ensured the inputs had suffered duty before claiming deemed credit.

3. The Tribunal analyzed whether the appellants suppressed facts by not verifying if the inputs had suffered duty before claiming deemed Modvat credit. The Supreme Court's interpretation of "suppression of facts" in tax matters was referenced, emphasizing deliberate non-disclosure to escape duty payment. The Tribunal found that the appellants knew the inputs were from manufacturers exempted from duty, yet failed to verify duty payment before claiming deemed credit. As the appellants did not take necessary steps to verify duty payment on inputs, the Tribunal held the department was justified in alleging suppression of facts. Consequently, the Tribunal upheld the Commissioner's order to reverse the Modvat credit, rejecting the appeal.