Tribunal rules in favor of appellants, finding demand time-barred, Modvat Credits disallowance unjustified

LARSEN & TOUBRE LIMITED Versus COLLECTOR OF C. EXCISE, BHUBANESWAR

LARSEN & TOUBRE LIMITED Versus COLLECTOR OF C. EXCISE, BHUBANESWAR - 1994 (72) E.L.T. 948 (Tribunal) Issues Involved:
1. Limitation of Demand
2. Validity of Modvat Credit
3. Requirement of Endorsements on Duty Paying Documents
4. Allegation of Fraud and Collusion

Summary:

1. Limitation of Demand:
The appellants argued that the demand was barred by limitation as the show cause notice was issued on 17-6-1992, beyond the six-month period from the relevant date (June 1987 to April 1991). The Collector invoked the extended period of limitation u/s 11A(1) of the Central Excises and Salt Act, 1944, alleging deliberate flouting of law and collusion with Central Excise Officers. The Tribunal found no evidence of suppression or collusion and held that the Modvat Credit was taken with full knowledge of the Central Excise Officers. Thus, the demand was time-barred.

2. Validity of Modvat Credit:
The appellants contended that Modvat Credits were taken in accordance with Rule 57G(2) of the Central Excise Rules, 1944, which requires inputs to be received under cover of appropriate documents evidencing payment of duty. The Tribunal found that all inputs were received with proper documents and the Collector's objection regarding the necessity of endorsements was not justified. The Tribunal held that the Modvat Credit could not be disallowed on technical grounds like the absence of endorsements or the form of the word "original" on documents.

3. Requirement of Endorsements on Duty Paying Documents:
The Collector disallowed Modvat Credits for lack of endorsements on duty paying documents. The Tribunal noted that the appellants had placed orders through their Calcutta and Bombay offices, and the goods were meant for their Kansbahal Works. The Tribunal held that since the documents mentioned the appellants' factory, the requirement for endorsements was unnecessary. The Tribunal also criticized the Collector for not allowing the appellants to make endorsements when requested.

4. Allegation of Fraud and Collusion:
The Collector alleged fraud and collusion between the appellants and Central Excise Officers, stating that the officers allowed inadmissible credits. The Tribunal found no basis for these allegations in the show cause notice or the evidence presented. The Tribunal emphasized that the appellants had complied with all formalities and disclosed all facts to the officers. Thus, the allegations of fraud and collusion were unfounded.

Conclusion:
The Tribunal set aside the impugned order, holding that the demand was time-barred and the disallowance of Modvat Credits was not justified on merits. The penalty imposed on the appellants was also set aside, and the appeal was allowed.