1998 (9) TMI 375 - AT - Central Excise

Tribunal affirms penalties for fraudulent Modvat credit use, emphasizes proper compliance

JAISHREE INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT

JAISHREE INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT - 2000 (126) E.L.T. 664 (Tribunal) Issues Involved:1. Condonation of Delay (COD) in filing appeals.2. Allegations of fraudulent activities including fabrication of documents.3. Determination of whether the appellants are manufacturers.4. Wrongful availing and utilization of Modvat credit.5. Imposition of penalties and confiscation.6. Jurisdictional issues regarding the adjudicating authority's decision.Detailed Analysis:1. Condonation of Delay:The COD application for the four appeals and stay petitions was considered first. The appellants argued that the delay in filing the appeal was due to the factory being closed and the department not sending the order to the counsel as requested. The respondent countered that the appellants refused to take delivery of the order and failed to inform the authorities of an alternate address. The tribunal found sufficient reason for the delay and condoned it.2. Allegations of Fraudulent Activities:The appellants were accused of procuring steel and coal at controlled rates and selling them at a premium in the open market. They allegedly fabricated documents like wage registers and excise records to show receipt of inputs and production of goods, despite no actual manufacturing activity. The tribunal noted that incriminating documents were seized, and discrepancies in stock were found, leading to the confirmation of duty demands and penalties by the Commissioner.3. Determination of Manufacturer Status:The appellants argued that they were not manufacturers as per the show cause notice, which stated no inputs were received, no manufacturing occurred, and no goods were cleared. They cited various legal precedents to support their claim that only manufacturers could be penalized under the relevant rules. The tribunal, however, focused on whether the appellants were entitled to Modvat credit, noting that the scheme under Rules 57A to 57-I implied a manufacturing process.4. Wrongful Availing and Utilization of Modvat Credit:The tribunal examined the allegations that the appellants wrongly availed and utilized Modvat credit without actual receipt of inputs or manufacturing. It was noted that Modvat credit is available only for inputs used in the manufacture of final products. The tribunal concluded that since no manufacturing activity occurred, the credit taken was ineligible.5. Imposition of Penalties and Confiscation:The Commissioner had imposed significant penalties and ordered confiscation of land, buildings, plant, and machinery. The appellants challenged these penalties, arguing they were not manufacturers and thus not subject to the penalty provisions. The tribunal, however, upheld the penalties, directing the appellants to deposit substantial amounts towards duty and penalties.6. Jurisdictional Issues:The appellants raised jurisdictional issues, arguing that the adjudicating authority had overstepped by addressing matters beyond the show cause notice. They cited various judgments to support their claim that the order was a nullity. The tribunal, however, found that the core issue was the wrongful availing and utilization of Modvat credit, not the manufacturing status, and thus the jurisdictional arguments were not applicable.Conclusion:The tribunal directed the appellants to deposit specified amounts towards duty and penalties by a set date, with the balance recovery stayed during the pendency of the appeals. Non-compliance would result in dismissal of the appeals. The tribunal's decision emphasized the wrongful utilization of Modvat credit and upheld the penalties imposed by the Commissioner.