TaxTMI 
TaxTMI 
2003 (8) TMI 270
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....l Excise Rules, on the billets purchased by them from M/s. Rashtreeya Ispat Nigam Ltd. (hereinafter referred to as M/s. RINL) without actually/physically receiving them in their factory, the officers conducted an enquiry, which revealed : - (a) Since M/s. BSAL found it profitable to deal with billets and rolled products of other manufacturers, in addition to their own manufactured products, they decided to purchase billets from M/s. RINL and rolled products from M/s. Madanlal Steels & Forgings Ltd., Madras. They were, consequent to agreements entered into, receiving consignments of billets cut into two pieces at the yards of their liaison agents in Visakhapatnam. Since billets of 11 metres length, as obtained from M/s. RINL could not be transported in an ordinary lorry, these two pieces, for the ease of transportation were carried in separate lorries with one of them carrying photocopies of the duty paid invoice of M/s. RINL. M/s. BSAL were taking credit of the Modvat on the invoices received, in full, as shown on the said invoices, whether or not consignments covered by that particular invoice was physically received in the factor....
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...., but were consigned directly from the Madras factory. (e) M/s. BSAL, Bellary availed Modvat credit of Rs. 5,21,421/- without actually receiving the MS rounds which were actually cleared to M/s. Super Forgings & Steels Ltd., Madras by M/s. Madanlal Steel & Forgings Ltd., Madras. However, in order to enable M/s. Super Forgings & Steels Ltd., Madras to avail Modvat, the branch office of M/s. BSAL at Madras issued modvatable invoices, as if the goods have been cleared from M/s. BSAL, Bellary and for this purpose, some blank pre-authenticated invoices were kept at Madras branch office. To sum up, there was only movement of documents from M/s. Madanlal Steels & Forgings Ltd., Madras to M/s. BSAL, on the basis of which, M/s. BSAL availed Modvat credit and then raised invoices from their branch office at Madras on M/s. Super Forgings & Steels Ltd., Madras so that the buyer company who received the goods could avail Modvat credit. (f) Annexures A1, A2 and A3 enclosed to Show Cause Notice show irregular Modvat credit availed by M/s. BSAL on the strength of duplicate copy of invoices o....
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.... Shri S. Madhava, Managing Director, Shri K.C. Kondiah, Joint Managing Director, Shri G.D. Nandish, Assistant Managing Director (Marketing) and Shri G. Basavaraj, Officer (Central Excise) of M/s. BSAL should not be imposed under Rule 209A of the said Rules for contravention alleged in Para 6 above". 3. The Commissioner after examining the issues, found : - (a) The appellants are a full-scale manufacturer paying substantial duty since 1993-94 when they went into production. Thereafter he recording the provisions of Rule 57GG introduced w.e.f 4-7-94, concluded as follows : - "19. In view of the above mentioned major relaxation and possibly on account of their better financial position, as also probably because of M/s. RINL's and M/s. Madanlal Steel & Forgings Ltd., Madras, reluctance to sell their products to manufacturers who had the wherewithal to buy only small quantities, M/s. BSAL apparently, sought to avail of this relaxation in the guise of being traders. To legitimize their new role, they addressed the Superintendent of Bellary Range vide their letter F-l86/94/17467, dated 31-3-94, giving intimation of their i....
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....y fraud, suppression, etc., the consultant put forth that the SCN was hit by limitation in that the demand had been made within the meaning of the extended proviso of Section 11A of the CEA, 1944. The main thrust of the defence therefor, was that there had been no suppression of facts, rendering the SCN not maintainable; that in terms of the case laws referred to below at (a) and (b), on the one hand Modvat credit could not be denied for procedural lapses and on the other that the procedure adopted by the assessee was as envisaged in the procedure for 'sale of goods in transit'. (a) Case Laws where Modvat could not be denied for procedural lapses : (i) Amar Poly Fabs Pvt. Ltd. v. CCE, Chandigarh - 1994 (72) E.L.T. 367 (T) (ii) Aluminium Inds. Ltd. v. CCE - 1993 (65) E.L.T. 460 (T) (iii) Maschmeijer Aromatics (I) Ltd. v. CCE - 1990 (46) E.L.T. 395 (T) (iv) Antrifriction Bearing Corpn. Ltd. v. CCE, Vadodara - 1995 (79) E.L.T. 156 (T) (v) Synthetics & Chemicals Ltd. v. CCE, Allahabad - 1997 (93) E.L.T. 92 (T) (v....
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....e apprehensions the department seems to have had of the likelihood of misuse of this new provision, which they have sought to overcome by laying down a comprehensive procedure, the need to adhere to which was seen to be crucial to this aspect of the Modvat scheme. It is for this reason that I find it difficult to categorise the case as being only of routine and technical infringements. The management of M/s. BSAL have more than anything shown a gross disregard for this well intended scheme in their established and admitted series of actions, driven by the monetary incentive. To view these as harmless technical infringements would therefore be to condone this deliberate cover up operation. It is mentioned there that the core of the Modvat credit scheme lies in the procedure stipulated therein. Most cases of irregular availment thereof would necessarily be infringement of some aspect of the laid down procedure. What needs to be considered is the distinction between bona fide technical errors, which need to be condoned and deliberate attempts to subvert the scheme. In the light of the facts of this case, I take the view that M/s. BSAL have availed of Modvat credit of duty on inputs wh....
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....ecutives, of the appellant-company, under Rule 209A of the Central Excise Rules, 1944, is not maintainable, since no evidence has been brought on record in the impugned show cause notice or the impugned order to show that, they had reason to believe or had knowledge that, they were dealing with goods, which are liable to confiscation. The evidence placed on record in the form of statements do not indicate such knowledge. Under the circumstances, no penalty can be imposed on the Executives of the appellant-company under the provisions of Rule 209A of the Central Excise Rules, 1944. In this connection, the appellants reference and reliance upon the following decisions : * Applied Electronics Ltd. v. CCE, Bombay-III [2001 (130) E.L.T. 500 (Tribunal) = 2000 (40) RLT 409 (T)] * Killick Nixon Ltd. v. CCE, Aurangabad [1998 (97) E.L.T. 436 (T)] * Standard Pencils Pvt. Ltd. v. CCE, Madras [1996 (86) E.L.T. 245 (T)] * To....
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....ctor, Shri Kondiah, Joint Managing Director, Shri G.D. Nandish, Asstt. General Manager and Shri G. Basavaraj, Officer (Central Excise) are therefore required to be allowed after setting aside the orders of penalties as imposed on them. (b) After considering the allegations to the effect : "The appellants have availed Modvat credit of Rs. 66,84,055/- on 5056.580 MTs of 125 X 125 mm billets, purchased by them from RINL without physically receiving the said goods in their factory. The said goods were diverted to Loharu Steel Industries, Kavita Sales Corpn. and Nandi Steels Ltd., Bangalore. They also availed Modvat credit of Rs. 5,21,421/- on 284.938 MTs of rolled products purchased by them from Madanlal Steels and Forgings Ltd., Madras without actually receiving the said rolled products in their factory at Bellary. The appellants have raised and issued modvatable invoices for the goods which were not removed/cleared/despatched from their factory and also abetted their customers in taking inadmissible Modvat credit on the strength of their own invoices which did not accompany the respective excisable goods. Thereby, the appellants passed on irregular (higher) Modvat credi....
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....to their premises at Bellary, ostensibly to save on transportation, delays and other inconvenience costs. (iii) Modvat Credit, however, was availed by BSAL only after receipt of duplicate/transporter's copy of the invoices issued by RINL and credit so taken were simultaneously debited/duty was paid on invoices thereafter issued by M/s. BSAL to the said job worker/M/s. Kavita Sales Corpn. and or M/s. Nandi Steels. (iv) Consequent to the modus operandi adapted by the appellants, they availed Modvat credit of Rs. 66,84,054/- on the quantity of billets not physically brought to the factory at Bellary. However, corresponding debits, amounting to Rs. 73,50,976/- were made. As admitted in the Show Cause Notice, this was made from RG23A Pt. II Rs. 42,85,687/-, RG23C Rs. 1,63,760/- and from PLA Rs. 29,11,529/-. Thus, it is an admitted position that, the appellants have in fact paid more duty effecting debit entries, than the credit taken by an amount of Rs. 6,66,922/-. (v) It is a fact that debits have been made in RG23C register, when no goods were manufactured i....
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....tfully silent as to what prevented his officers from educating the assessees and or whether in spite of such an education, having been imparted, the assessee continued to follow a procedure as per his own understanding and which may not be the prescribed procedure. The Department as facilitator for the trade has an obligation to guide the assessees. (iii) When Revenue interest are not jeopardized, inasmuch as the appellants have paid more duty by following the procedures as adopted by them, there cannot be any case for penalty, for not following the correct procedure, which in any case was newly introduced and the appellants were not educated or informed about the same. Penalty is not a crop in hand, given to the officers, to crack, for demonstrating, to discourage others, as held in Para 29 by the Commissioner. Such penalties imposed as in the facts of this case are required to be set aside. (iv) The Board's Instructions No. 96/7/95-CX., dated 13-2-1995 and 218/52/96-CX., dated 4-6-96 reinforces our view that there was nothing amiss in the goods having been transported from the premises of the supplier t....
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....an entry that is false. There is no finding as to what are the false entries and on which invoice call for a penalty under Rule 52A(8). The penalty under Rule 52A(8) is not called for. (iii) Rule 173Q(1)(bb) is applicable to an assessee. However, the Rule on plain reading indicates that it bars, taking of credit and its utilization, knowing that the same was not permissible. Since the credits on the duties shown on the invoices of M/s. RINL was taken and simultaneously reversed, not only in full measure, but, in addition, by an excess amount, and there is no charge of overdrawal of Modvat credit amount which could be arrived. The penalty under Rule 173Q(1)(bb) is not called for, since no irregular availment and utilization is established. (iv) Rule 173Q(1)(bbb) is applicable to a Registered Dealer. The impugned order in finding at Para 25, while considering the material concluded with the following words : - "....... The trading operation carried on by M/s. BSAL is accordingly not recognized as such." &n....