2008 (11) TMI 610 - AT - Central Excise

CENVAT/MODVAT credit - duty paying invoices - extended period of limitation - imposition of penalty - evidence

Issues Involved:
1. Validity of the second show cause notice issued by the Commissioner in 1996.
2. Whether the demands are barred by limitation.
3. Validity of the order-in-original regarding the demands.
4. Whether cash refund is to be sanctioned if the demands are set aside.
5. Liability of the Director and employees to penalties.

Issue-wise Detailed Analysis:

1. Validity of the Second Show Cause Notice Issued by the Commissioner in 1996:
The appellants argued that the second show cause notice issued in 1996 was invalid as it was based on the same issue as the first show cause notice issued in 1994. The Tribunal analyzed that the first show cause notice covered gate passes from March 1994 and was based on document scrutiny without investigation, while the second show cause notice was based on detailed investigations, including vehicle and consignee inquiries. The Tribunal concluded that the second show cause notice was valid as it involved additional documents and issues, distinguishing it from the first notice.

2. Whether the Demands are Barred by Limitation:
The appellants contended that the demands were barred by limitation since the modvat credit was reflected in the RT-12 returns filed by them. The Tribunal noted that the Commissioner invoked suppression due to manipulations in the description of goods and endorsements on gate passes. The Tribunal upheld the invocation of the extended period for demand, citing that the investigations revealed facts not apparent from the initial document scrutiny. The Tribunal found the suppression argument valid and confirmed the demands.

3. Validity of the Order-in-Original Regarding the Demands:
The Tribunal examined the evidence and arguments regarding the transportation of goods and the manipulation of documents. The appellants failed to provide sufficient evidence of the physical movement of goods or valid endorsements by consignees. The Tribunal concluded that the credits taken by the appellants were irregular and there was suppression of facts. Consequently, the order-in-original confirming the demands was upheld.

4. Whether Cash Refund is to be Sanctioned if the Demands are Set Aside:
The appellants requested a cash refund if the appeal was allowed, citing judgments supporting their contention. However, since the Tribunal upheld the demands and found the credits taken were irregular, the question of cash refund became moot. The Tribunal did not address this issue further in the final decision.

5. Liability of the Director and Employees to Penalties:
The Tribunal upheld the penalties imposed on the Director and employees, noting their roles in the manipulations and irregular credit claims. The penalties were deemed reasonable and not excessive. The Tribunal found no reason to interfere with this aspect of the order.

Separate Judgments:
Archana Wadhwa, Member (Judicial):
Member (Judicial) disagreed with the majority, arguing that the entire exercise was revenue-neutral and that the second show cause notice should not be upheld. The Member (Judicial) found the demands time-barred and the penalties unjustified, proposing to set aside the impugned order except for the uncontested demand of Rs. 1,03,450/-.

P.G. Chacko, Member (Judicial):
Member (Judicial) concurred with Member (Judicial) Archana Wadhwa, emphasizing that the Revenue failed to provide cogent evidence of non-receipt of goods by the appellants. The Member highlighted the revenue-neutral nature of the transactions and the lack of suppression, supporting the setting aside of the impugned order.

Final Order:
In view of the majority decision, the impugned order was set aside except for the confirmation of the uncontested demand of Rs. 1,03,450/-. The appeals filed by the appellants were rejected.

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