2000 (6) TMI 284 - AT - Central Excise

Summary

Issues: Disallowance of Modvat credit for alleged receipt of market scrap instead of ship breaking scrap, contravention of Rule 57G, imposition of penalty

Analysis:
1. Disallowed Modvat Credit: The appellants claimed Modvat credit for ship breaking scrap but were alleged to have received market scrap instead. The Commissioner disallowed the credit as the appellants had not received the claimed input, leading to a penalty of Rs. 6 lakhs. The appellants contended they purchased ship breaking scrap, made payments via cheques, and submitted approved Modvat credit details regularly.

2. Allegations and Show Cause Notice: The Collector alleged that the appellants received market scrap, manipulated records, and used fake suppliers to avail Modvat credit improperly. The Show Cause Notice mentioned discrepancies in the scrap received, non-payment of actual duty, and mixing of market scrap with ship breaking scrap, contravening Rule 57G. Allegations covered the period from 1988 to 1991.

3. Defence and Commissioner's Findings: The Commissioner found against the appellants based on various witnesses' statements and evidence. The Manager confirmed not ordering ship breaking scrap, while suppliers admitted supplying market scrap with fake GP1s. The Commissioner highlighted discrepancies in rates paid, loss of original identity of scrap, and reliance on Gate Passes. Legal precedents were cited to support the decision.

4. Appellants' Arguments: The appellants argued they ordered heavy scrap, i.e., ship breaking scrap, supported by witness cross-examinations. They claimed all witnesses supported receiving duty-paid scrap under GP1s. They contended the allegations were vague, penalty unjustified, and Section 11A not invoked in the SCN.

5. Confirmation of Impugned Order: The Tribunal upheld the Commissioner's decision, noting the appellants' failure to explain the receipt of non-ship breaking scrap with GP1s. The mixing of scrap types led to loss of original identity, contravening Rule 57G. Doubts on payment discrepancies raised questions on transaction legitimacy, justifying the penalty. The Tribunal dismissed the appeal, affirming the Commissioner's findings and penalty imposition.