2003 (10) TMI 552 - AT - Central Excise

Appeal successful in credit denial case due to lack of evidence for extended limitation period

The appeal was allowed, setting aside the order denying credit and imposing penalties. The court emphasized that the extended limitation period for ... Cenvat/Modvat - Duty paying documents - Demand - Limitation Issues:1. Denial of credit on duty paid on steel coils received from dealers.2. Imposition of penalty on the appellant and the dealers.3. Interpretation of Rule 173Q(bb)(1) regarding reasonable precautions for duty payment verification.4. Application of the extended period of limitation for issuing the denial notice.Analysis:1. The genesis, the appellant, took credit for duty paid on steel coils received from three dealers. However, an investigation revealed discrepancies in the duty payment on the goods supplied. The department issued a notice proposing denial of credit and penalties. The Additional Commissioner upheld the denial and imposed penalties, which were later confirmed by the Commissioner (Appeals).2. The appellant contended that the denial was based on the failure to take reasonable precautions to ensure duty payment, as required by Rule 173Q(bb)(1). The rule imposes penalties on manufacturers not taking reasonable steps, but the appellant argued that during the relevant period, no such obligation existed. The appellant had taken steps to verify the identity and address of the manufacturers, satisfying the rule's requirements. The department's contention that credit cannot be taken if duty payment is not shown was accepted, but the extended limitation period for issuing the denial notice was deemed unjustified.3. The judgment highlighted that the appellant had no knowledge or means to ascertain the duty payment status beyond the information provided in the invoices received from the dealers. The lack of evidence showing the appellant's awareness of duty non-payment or discrepancies in the goods received indicated that the extended limitation period could not be invoked. The notice lacked specific allegations or facts to justify the extended period, as the appellant had fulfilled the reasonable steps requirement under the rule.4. Ultimately, the appeal was allowed, and the impugned order denying credit and imposing penalties was set aside. The judgment emphasized that without evidence of the appellant's knowledge of duty non-payment or discrepancies, the extended limitation period for issuing denial notices could not be applied. The appellant's compliance with the rule's requirements regarding reasonable precautions further supported the decision to allow the appeal.