TMI Blog2003 (8) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... at M/s. BSAL were availing credit under Rule 57A of the Central 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it 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 of M/s. RINL without having received the consignments to their factory. (g) Annexure C to the Show Cause Notice shows the quantity of rolled products on which M/s. BSAL availed Modvat c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 intention to trade in excisable goods. In this letter, they have also mentioned that they would not be bringing such trading excisable goods in their manufacturing premises. Through this very cryptic intimation, they have sought to cover up the major aspects of their trading programme which amongst other things, included making it appear that they had purchased 125 mm X 125 mm billets from M/s. RINL and rolled products from M/s. Madanlal Steel Forgings Ltd., Madras, and after their own process of manufacture, thereon had cleared them to their buyers, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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) (vi) Siya Ram Platex (P) Ltd. v. CCE, Jaipur - 1994 (73) E.L.T. 915 (T) (b) Case Laws in respect of Sale of goods in transit (i) Eveready Inds. India Ltd. v. Hyderabad - 1997 (89) E.L.T. 189 (T) (ii) Ganesh Paper Mills v. CCE, Kanpur - 1998 (100) E.L.T. 390 (T) (iii) Stadmed Pvt. Ltd. v. CCE, Allahabad - 1998 (102) E.L.T. 466 (T) 23. From the foregoing narration of the Departmental case vis- -vis the defence it is seen that, to state, that there was no fraudulent actions and commissions on the part of the assessee would amount to a blatant attempt to reconstruct the undisputed facts and to contour them to legitimacy by seeking to be squarely covered by case laws. 24. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which were not received in the factory and were not used in the manufacture of the final products as declared as alleged, in the show cause notice. The trading operation carried on by M/s. BSAL is accordingly not recognized as such. 26. Apart from the above, I find that all the representatives of the management who have been shown cause to under Rule 209A of the Central Excise Rules on account of their covert involvement in this case are liable to be penalized. In view of my above findings. and ordered : (i) the confirmation of demand of Rs. 71,91,752.46 being the irregular Modvat credit availed by M/s. BSAL under Rule 57-I(i)(ii) of the Central Excise Rules, 1944 and a demand of Rs. 1,63,760/- being Modvat credit on capital goods availed by them and mis-utilised for payment of duty on excisable goods neither manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 558 (T)] M. Hariraju v. CCE [1998 (100) E.L.T. 203 (T)] Jalmadhu Corporation v. CCE [1999 (114) E.L.T. 883 (T)] S.R. Jhunjhunwala v. CCE [1999 (114) E.L.T. 890 (T)] D.M. Gears Pvt. Ltd. v. CCE, Delhi [2002 (141) E.L.T. 514 (T)] Sound Cast Founders Engineers v. CCE [2002 (150) E.L.T. 82 (Tribunal) = 2002 (50) RLT 203 (T)] is well founded. Nothing contrary has been shown. The Ld. Commissioner has not found any exigible goods to be liable for confiscation. Rule 209A reads as follows : - Rule 209A Penalty for certain offences. - Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or ten thousand rupees, whichever is greater. This rule makes it very clear that when knowledge or reasonable belief about the goods liable to confiscation does not exist, penalty under this Rule was not imposable. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , billets cleared from RINL, have been really received in their factory and then despatched further to Bangalore from Bellary, while there was no physical movements of billets from Visakhapatnam to BSAL. The said billets, in fact were transported from RINL to Bangalore to the said parties for being converted into rolled products. All the above acts of the appellants constitute fraud, suppression and wilful misstatement of facts. Therefore, the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 has to be invoked for recovery of Modvat Credit irregularly availed. the admitted positions as follows, are found : - (i) The appellants had vide their letter dated 31-3-94 intimated the Superintendent of Central Excise, Bellary Range about their plan to trade in excisable goods (similar to the goods manufactured by them) and that they will not be bringing such excisable goods meant for trading to their premises but they would be raising necessary invoices for the same. (ii) Pursuant to the above plan, they purchased billets, from RINL, partly for their own consumption and partly for trading, dealt with at Visakhapatnam by cutting the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of Rs. 6,66,922/-, then it is apparent that M/s. BSAL has paid Rs. 5,03,162/- from their cash account i.e. PLA account which was not required to be paid. There is no finding of any drawl/overdrawl of credit so availed in RG23A. (c) From the above uncontroverted findings on record, it is apparent that : (i) M/s. BSAL in following the procedure have been at a loss. This loss has occurred, it appears, due to their desire to keep their purchases made from M/s. RINL, a trade secret, from their buyers at Bangalore/Madras. Surely, an attempt to keep commercial secrets, when they are not endangering Revenue interest, cannot be found to be a reason to visit the appellants with a penalty as arrived at by the ld. Commissioner vide his order extracted hereinabove. (ii) There is no doubt that the appellants were required to follow prescribed procedure for a Registered Dealer, as regards, the sales effected on, Trading Account to parties other than the job worker concerns. They have not followed Rule 57GG procedure, which was introduced for registered dealers. For not following that procedure, the heavy penalty of Rs. 50 lakhs, as imposed, is not called for, si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. v. CCE [1998 (101) E.L.T. 314 (T)] Nitson Laboratories v. CCE [1998 (26) RLT 359 (T)] is well founded; it has to be upheld, that when the activity of the assessee was within the knowledge of the Department, the extended period of limitation as in this case could not be invoked and this appeal is to be allowed with consequential relief. (d) From Para 29 of the impugned order, it is apparent that a combined penalty of Rs. 50 lakhs has been imposed under Rules 52A(8), 173Q(1)(bb), 173Q(1)(bbb) and 226. Examining the same, it is to be held : (i) Cumulative penalties, without indicating a breakup cannot be upheld since the maximum limit of penalty under these rules is different, e.g. under Rule 226 the maximum penalty is only Rs. 2,000/- for not maintaining proper account, under Rule 52A(8) it is three times the value of goods and under Rule 173Q(1), it is three times the value of Rs. 5,000/-. (ii) Rule 52A(8) could be invoked only when an invoice is not made, not produced or is having 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 pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Rs. 1,63,760/- debited from RG23C register, which is found to be not permissible, and ordered to be recovered as demand under Rule 57U. The recovery of the debits made in the RG23C registers cannot be ordered under Rule 57U since there is no case of charges of the amount of Rs. 1,63,760/- and credit of that amount in the RG23C to be not permissible. An incorrect debit, if made in RG23C, cannot be ordered recovery under Rule 57U. (viii) Rule 226 and its infringements cannot be established since credit and simultaneous debits would be an effort to keep accounts correct. (e) The appellants have made a statement, that the billets sent to M/s. Loharu Steel Industries were sent for a job worker and the Show Cause Notice also admits that the said billets were converted into Tor Steel, and after such a conversion, at the premises of M/s. Loharu Steel on job work basis, the said goods were directly despatched to Sabeena Steels under cover of sale invoices prepared at branch office at Bangalore. The aspect of applicability of the provisions of Rule 57J along with the benefits of Notification No. 351/86 as amended has not been examined by the ld. Commissioner. In any case, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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