2002 (5) TMI 793 - Commission - Central Excise

Commission Upholds Revenue's Excise Duty Demand, Denies Modvat Credit

IN RE: GUJARAT STEEL INDUSTRIES

The Commission ruled in favor of the Revenue, upholding the demand for recovery of Central Excise duty for goods illicitly cleared. The applicant's claim ... Clandestine removal - Cenvat/Modvat - Settlement Commission - Immunity from prosecution Issues Involved:1. Evasion of Central Excise Duty2. Admissibility of Deemed Modvat Credit3. Calculation of Duty on Cum-Duty-Value Basis4. Adjustment of Paid Amounts5. Penalty and Fine6. Criminal ProsecutionDetailed Analysis:1. Evasion of Central Excise Duty:The applicant, engaged in the manufacture of M.S. Round bars, was accused of evading Central Excise duty by procuring raw materials in the names of fictitious traders and removing finished products as trading goods using trading sales invoices of M/s. Janata Steel Traders. The Show Cause Notice demanded the recovery of Rs. 39,40,861/- and Rs. 24,806/- for excisable goods illicitly cleared and seized, respectively. The applicant admitted additional duty liability of Rs. 15,44,914/- for goods sold in the name of M/s. Janata Steel Traders and requested adjustments for amounts already paid.2. Admissibility of Deemed Modvat Credit:The applicant claimed deemed Modvat credit of Rs. 23,45,006/- under Rule 57G(2) for inputs used in production. The Revenue argued that deemed credit was only for duty-paying units and not applicable to units with clearances exceeding Rs. 75 lakh. The Commission upheld the Revenue's stance, referencing the Tribunal's decision in Digambar Foundry, which stated that units exceeding the clearance limit were not eligible for deemed Modvat credit.3. Calculation of Duty on Cum-Duty-Value Basis:The applicant argued for the duty to be calculated on a cum-duty-value basis, reducing the total liability. The Commission cited the Larger Bench decision in Srichakra Tyres Ltd. and the Supreme Court ruling in Maruti Udyog Ltd., confirming that the value realized from clandestine sales should be treated as cum-duty price. Consequently, the duty liability was reduced to Rs. 32,72,340/-.4. Adjustment of Paid Amounts:The applicant had paid Rs. 1,48,114/- and claimed to have adjusted Rs. 13,96,800/- suo motu. The Commission found this adjustment irregular and ordered the applicant to pay interest on the adjusted amount at 18%. The applicant was directed to pay the remaining duty liability of Rs. 16,72,426/- within 30 days.5. Penalty and Fine:The Commission imposed a penalty of Rs. 10 lakhs on the applicant and Rs. 1 lakh each on Shri Janwarimal I. Bafna, Shri Madanlal J. Bafna, and Shri Vijaysingh J. Bafna, citing the lack of true and full disclosure. Additionally, a fine of Rs. 25,000 was imposed for the seized excisable goods.6. Criminal Prosecution:The Commission noted that criminal prosecution had already been initiated in a court of law and did not pass any further orders regarding prosecution.Conclusion:The settlement required the applicant to pay the recalculated duty liability, interest, penalties, and fines within specified timelines. The settlement would be void if found to be obtained by fraud or misrepresentation. All concerned parties were informed accordingly.