1997 (4) TMI 261 - AT - Central Excise

Appeal granted: Duty demand & penalty set aside. Modvat credit denial unfounded. Show cause notice time-barred.

The tribunal allowed the appeal, setting aside the demand of duty and penalty. It held that the denial of Modvat credit was unfounded as the appellants ... Limitation - extended period for recovery of wrongly availed Modvat credit - Suppression with intent to evade duty - Proviso to Rule 57I - proper officer to invoke extended period - Jurisdictional validity of show cause noticesLimitation - extended period for recovery of wrongly availed Modvat credit - Suppression with intent to evade duty - Demand for Modvat credit is barred by limitation because the extended fiveyear period was not invocable as there was no suppression with intent to evade duty. - HELD THAT: - The Tribunal concluded that the department had actual knowledge of the appellant's availment of Modvat credit through RT12 returns, abstracts of credit availment maintained in RG23 Part I and Part II, and copies of gate passes furnished to the department; moreover the appellants had earlier communicated (letter dated 1101986) their intention to avail credit on steel tubes, rods and to take credit on the basis of gate passes. In these circumstances the requisite element of suppression with intent to evade duty, necessary to invoke the extended limitation period, was absent. The Tribunal relied on precedent to the same effect (Vikrant Televisions (India) Pvt. Ltd. v. Collector ) and held that the demand based on invocation of the extended period is timebarred and cannot be sustained.Demand for the disputed Modvat credit is barred by limitation and set aside for lack of suppression with intent to evade duty.Proviso to Rule 57I - proper officer to invoke extended period - Jurisdictional validity of show cause notices - Show cause notice issued by the Assistant Collector invoking the extended period under the proviso to Rule 57I was without jurisdiction; such notices must be issued and decided by the Collector where suppression, wilful misstatement or collusion is alleged. - HELD THAT: - The Tribunal examined Board's instruction (letter No. Y/267/86/88CX8 dated 20121988) clarifying that, to secure uniformity, show cause notices under amended Rule 57I invoking the fiveyear period for wrong availment of Modvat credit due to suppression, wilful misstatements or collusion should be issued and decided by the Collector. Applying that administrative direction, the Tribunal held that a show cause notice issued by the Assistant Collector in circumstances invoking the proviso to Rule 57I suffers from lack of jurisdiction and is invalid.The show cause notice and consequent demand suffer from lack of jurisdiction as they were not issued by the Collector as required in cases invoking the extended period.Penalty for wrongful availment - consequential relief - Penalty imposed by the lower authorities is set aside. - HELD THAT: - Having held that the demand itself is barred by limitation and that the show cause notice was issued without jurisdiction, the Tribunal concluded that the imposition of penalty cannot stand. The finding of absence of suppression with intent to evade duty further negates the foundation for the penalty that was imposed by the lower authorities.The penalty imposed on the appellants is set aside.Final Conclusion: The impugned order confirming duty and imposing penalty is set aside; the appeal is allowed, the demands are held timebarred and the penalty is quashed. Issues:- Denial of Modvat credit under three headings- Imposition of penalty- Barred by limitation- Lack of jurisdiction in issuing show cause noticeDenial of Modvat Credit:The judgment revolves around the denial of Modvat credit under three headings: (a) credit on steel tubes not covered by the deemed credit order, (b) credit taken on GP 1s which were not endorsed, and (c) credit on steel scrap not declared by the appellants. The lower authorities imposed a penalty of Rs. 20,000 along with the denial of credits.Barred by Limitation:The appellant argued that the demand is barred by limitation as the show cause notice was issued beyond the statutory 6-month period. They contended that the department was aware of the credit taken by the appellants through various filings and correspondence, thus ruling out suppression with intent to evade duty. The jurisdictional issue was raised concerning the authority of the Assistant Collector to issue the notice beyond the 6-month period.Lack of Jurisdiction in Issuing Show Cause Notice:The Departmental Representative argued that the Collector of Central Excise is the proper officer for raising demands beyond the normal 6-month period. However, the judgment highlighted that the extended period of limitation was not applicable as there was no suppression on the part of the appellants to evade duty. The judgment referred to a previous case to support this finding.Analysis and Conclusion:The tribunal agreed with the appellant's submissions, emphasizing the correspondence exchanged and filings made by the appellants, which negated any suppression of facts. The judgment cited a previous case to support the view that the demand of duty was indeed barred by limitation. Additionally, it was held that the Assistant Collector lacked jurisdiction to issue the show cause notice beyond the 6-month period, as per the Board's instructions. Consequently, the demand of duty and penalty were set aside, and the appeal was allowed.