1988 (6) TMI 198 - Commissioner - Central Excise

Appeal modified for deemed credit, penalty upheld. Appellants succeed on estoppel grounds. Conditions not in notice deemed unsustainable.

SHREE MAHAVIR ISPAT LTD. Versus ASSISTANT COLLECTOR OF CE.

The appeal was modified in favor of the appellants on certain grounds related to the deemed credit, while the penalty imposed was maintained. The ... MODVAT credit Issues:1. Whether the appellants were liable to reverse the credit wrongly taken by them in their RG-23A Part II.2. Whether the order of the Assistant Collector was correct in invoking certain conditions.3. Whether the appellants were entitled to avail of deemed Modvat credit on iron steel scrap.Analysis:Issue 1:The appeal was against the order directing the appellants to reverse the credit wrongly taken by them. The Assistant Collector had imposed a penalty on the appellants, which was later reduced. The appellants argued that no cash payment was made, and hence, the reversal would not cause financial hardship. They cited various instructions and case laws to support their plea. The appellants emphasized that the Government's order did not have retrospective effect, and the Assistant Collector was bound by the Government's instructions. The doctrine of promissory estoppel was invoked to argue against the reversal of credit. The Commissioner found merit in the appellants' argument that the show cause notice did not mention that the waste or scrap was non-duty paid, leading to a lack of opportunity for defense. Despite this, the Commissioner proceeded to decide the case without remanding it for further adjudication.Issue 2:The appellants challenged the order of the Assistant Collector invoking certain conditions not mentioned in the show cause notice. They cited case laws emphasizing that orders based on different grounds from those in the notice were liable to be set aside. The Commissioner agreed with the appellants that the order was not sustainable in law due to the absence of this ground in the show cause notice. The burden of proving that the inputs were not duty paid was deemed to be on the Department, as per relevant case laws cited.Issue 3:The key issue was whether the appellants were entitled to avail of deemed Modvat credit on iron steel scrap. The appellants argued that they had followed the provisions correctly and that their bona fides were not in doubt. They contended that the burden of proof lay with the Department to show that the scrap was not duty paid. The Commissioner noted that the appellants had purchased the scrap from the open market, which was presumed to be duty paid. The Commissioner found that the appellants were entitled to the deemed credit only until a certain date, as per Government orders, and were required to pay back credits taken after that date. The penalty imposed was upheld as reasonable.In conclusion, the appeal was modified in favor of the appellants on certain grounds related to the deemed credit, while the penalty imposed was maintained.