1997 (10) TMI 258 - AT - Central Excise

Issues Involved:
1. Whether the gate passes on which Modvat credit was taken were genuine.
2. Whether the appellants had knowledge of the fictitious nature of the gate passes.
3. Whether the appellants took reasonable steps to ensure the truthfulness of the transactions.
4. Whether the extended period of limitation under Rule 57-I read with Section 11A(1) of the Central Excise Act, 1944, was applicable.
5. Whether there was a violation of principles of natural justice due to denial of cross-examination.
6. Whether the appellants were entitled to deemed Modvat credit.
7. Whether the statements recorded were voluntary and admissible as evidence.

Detailed Analysis:

1. Whether the gate passes on which Modvat credit was taken were genuine:
The Collector found that the gate passes used to avail Modvat credit were not genuine. The Director of the Noticees admitted that the documents were fake, and the credit reversed should be deemed final. The investigation revealed that the gate passes purportedly issued by M/s. Hind Auto Clutches and M/s. Laxmi Manufacturers (P) Ltd. were not valid as they were either for different goods or issued before the firms started issuing gate passes. The statements of Ashish Gupta and Y.P. Aggrawal confirmed that the gate passes were printed and rubber stamps made fraudulently.

2. Whether the appellants had knowledge of the fictitious nature of the gate passes:
The Collector held that the appellants had full knowledge of the fictitious nature of the documents. The Director's admission and the corroborative statements of Ashish Gupta and Y.P. Aggrawal indicated that the appellants were aware that no material was supplied, and only fake documents were exchanged for monetary benefit. The appellants' actions were found to be deliberate with the intention to defraud the revenue.

3. Whether the appellants took reasonable steps to ensure the truthfulness of the transactions:
The Collector concluded that the appellants did not take reasonable steps to verify the authenticity of the transactions. The appellants' defense that they paid through 'Payee Account' cheques was found to be inconsequential as the investigation showed that no goods were received, and only cash was exchanged for the fake documents.

4. Whether the extended period of limitation under Rule 57-I read with Section 11A(1) of the Central Excise Act, 1944, was applicable:
The appellants argued that the demand was time-barred as the show cause notice was issued beyond six months from the date of taking the credit. However, the Collector and the Tribunal found that the extended period was applicable due to the deliberate suppression of facts, fraud, and wilful misstatement by the appellants. The detailed investigation revealed the fraudulent nature of the transactions, justifying the invocation of the longer period.

5. Whether there was a violation of principles of natural justice due to denial of cross-examination:
The appellants contended that the denial of cross-examination of the persons whose statements were relied upon violated principles of natural justice. However, the Tribunal held that the detailed investigations and corroborative evidence were sufficient to prove the case against the appellants. The denial of cross-examination did not vitiate the proceedings, and there was no denial of natural justice as the appellants were given ample opportunity to present their case.

6. Whether the appellants were entitled to deemed Modvat credit:
The appellants claimed entitlement to deemed Modvat credit on the strength of gate passes. However, the investigation established that the gate passes were fake, and no goods were received. The Tribunal upheld the Collector's finding that the appellants were not entitled to the credit as the transactions were fraudulent, and only fake documents were used to claim the credit.

7. Whether the statements recorded were voluntary and admissible as evidence:
The appellants argued that the statements of Shri Subhas Bansal were dictated by the Superintendent and not voluntary. However, the Tribunal noted that the statement was not retracted and was written in Bansal's handwriting, indicating it was voluntary and true. The Tribunal found that the statements of Ashish Gupta and Y.P. Aggrawal were corroborative and supportive of the Revenue's case, and their evidentiary value was upheld despite the denial of cross-examination.

Conclusion:
The Tribunal upheld the impugned order, finding that the appellants deliberately engaged in fraudulent transactions to avail Modvat credit on the strength of fake gate passes. The extended period of limitation was applicable due to suppression of facts and fraud. There was no denial of natural justice, and the appellants were not entitled to the deemed Modvat credit. The appeal was rejected.

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