2000 (11) TMI 780 - AT - Central Excise

Modvat - Inputs cleared from supplier s factory under cover of gate passes - Demand - Limitation

Summary

Issues Involved: Denial of Modvat credit, validity of depot invoices, procedural compliance, limitation period, imposition of penalty.

1. Denial of Modvat Credit:

The Commissioner denied the benefit of Modvat credit amounting to Rs. 2,32,69,757.00 for the period from July 1994 to December 1994, and imposed a penalty of Rs. 25 lakhs. The core issue was the denial of Modvat credit of Rs. 1,33,42,931.00 availed by the appellant on Linear Alkyl Benzene received from M/s. Tamil Nadu Petro Products Ltd. (TPL). The denial was based on the allegation that the credit was availed on the basis of irregular modvatable documents.

2. Validity of Depot Invoices:

The appellant argued that the Modvat credit was taken based on 165 invoices issued by TPL from its Royapuram depot on 7-4-1994, before the delivery of goods. These invoices corresponded to 165 gate passes issued during the period 12-11-1993 to 19-3-1994. The Commissioner contended that the depot invoices from the Haldia depot were irrelevant because the registration certificate was granted for trading activities only, and issuance of depot invoices by TPL's registered depot was not permitted under the law against GP 1 initially issued from the factory.

3. Procedural Compliance:

The appellant contended that the invoices issued by TPL from its Royapuram depot were in accordance with Notification No. 15/94-C.E. (N.T.), dated 31-3-1994, and the depot was registered with the Central Excise Department by 31-12-1994, making the documents valid for Modvat purposes. The appellant also argued that the depot invoices from their Haldia depot were valid and lawful modvatable documents, as the depot was registered under Rule 57GG on 30-12-1994.

4. Limitation Period:

The appellant argued that the show cause notice issued on 28-8-1994 for the period July 1994 to December 1994 was barred by the limitation period of six months. They contended that there was no mis-statement or suppression with an intention to evade duty, and the central excise authorities were fully aware of the facts and circumstances. The Commissioner, however, held that the extended period was rightly invoked due to deliberate acts by the appellant to evade payment of duty.

5. Imposition of Penalty:

Given that the appeal was allowed on merits and on the point of limitation, the imposition of a personal penalty of Rs. 25 lakhs on the appellant was deemed unjustified and was set aside.

Detailed Analysis:

Denial of Modvat Credit:

The Commissioner denied the Modvat credit on the basis of alleged irregular modvatable documents. The appellant argued that TPL, a leading manufacturer, had followed all necessary procedures, including issuing depot invoices before the delivery of goods. The Tribunal found force in the appellant's submissions, noting that the inputs were cleared under valid gate passes and all necessary precautions were taken to switch to the new invoice system. The Tribunal held that the benefit of Modvat credit could not be denied on technical grounds or procedural lapses, and allowed the credit of Rs. 1,33,42,931.00.

Validity of Depot Invoices:

The appellant contended that the depot invoices were issued in accordance with the law and were valid modvatable documents. The Tribunal agreed, noting that the invoices contained all necessary particulars and were issued from a registered depot. The Tribunal also allowed the Modvat credit of Rs. 44,09,449/- availed on the basis of 12 invoices issued by the Royapuram depot, as the Commissioner had provided no reasoning for their denial.

Procedural Compliance:

The appellant demonstrated compliance with procedural requirements, including the registration of depots and issuance of invoices in accordance with relevant notifications and circulars. The Tribunal found that the appellant had taken all necessary precautions and that the documents were valid for Modvat purposes.

Limitation Period:

The Tribunal found that the Commissioner had not attributed any specific act of omission or commission to the appellant that would justify invoking the extended limitation period. The Tribunal held that the demand was barred by limitation, as the central excise authorities were fully aware of the appellant's activities and had granted necessary permissions.

Imposition of Penalty:

As the appeal was allowed on both merits and limitation, the Tribunal found no justification for the imposition of a personal penalty on the appellant. The penalty was accordingly set aside, and the appeal was allowed with consequential relief to the appellants.

In conclusion, the Tribunal allowed the appeal on the grounds of procedural compliance, validity of depot invoices, and limitation, and set aside the penalty imposed by the Commissioner.