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TMI Blog2008 (11) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Departmental officers found that in the case of some of the gate passes submitted by NRL evidencing the modvat credit taken, credit was taken on the basis of endorsement made on the back of the gate passes by the original manufacturer. The consignees in the gate passes as such were different. They also found in the gate passes in addition to the description of the goods "H. Acid", "Wet Cake" was added by putting a rubber stamp. The investigation also revealed that in the corresponding duplicate gate passes submitted with RT-12 returns by the manufacturer (SCCI) to the Department, the rubber stamped words "Wet Cake" were not found. There was no endorsement on the back side of GPI also. A show cause notice was issued to NRL alleging wrong utilization of modvat credit of Rs. 10,92,824/- on the ground that gate passes were not in the name of the party nor there was endorsement made by the consignee but endorsed by the manufacturer himself. The Departmental officers investigated the case further and the investigations lead to detection of similar modus operandi on the part of SCCI and consequently, show cause dated 24-1-1996 was issued to both SCCI and NRL wherein the modvat credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice and adjudication by Commr. vide his order dated 5-3-1998, vide his order-in-original dated 26-9-2003. (viii) The order dated 5-3-1998 passed by the Commissioner was appealed and on remand by the Tribunal, the present order-in-original has been passed which is the subject matter of the present appeals. 4. Heard both sides. 5. Learned Advocate Shri J.C. Patel for the appellants fairly conceded that the demand of Rs. 1,03,450/- is not being contested. The learned Advocate on behalf of the appellants argued that credit has been taken correctly by both the units since 'H Acid' supplied by them was rejected by the buyers. Because of absorption of moisture from atmosphere, they became lump and hence the words "wet cake" was put and sent to sister unit for further processing. He fairly admits that the required procedure may not have been followed even though the allegation that 'wet cake' was not mentioned as one of the inputs has been denied. He also stated that out of the 30 vehicles used for transportation, verification has been done only in respect of 4 and out of which one driver admitted having carried the goods and in another case, there was contradict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the demands is to be upheld; (iv) If the demands are set aside, whether cash refund is to be sanctioned; and (v) Whether Director and the employees are liable to penalty. 7. There is no dispute that first show cause notice was issued on 26-7-1994 whereas the second show cause notice was issued on 24-1-1996 to NRL. The show cause notice issued on 26-7-1994 covered the gate passes on which credit was taken in March, 1994 only and the ground for issue of show cause notice for rejection of modvat credit was that the gate pass was not in the name of the party nor endorsed by the consignee but endorsed by the manufacturer himself. Apparently, no investigation was conducted but show cause notice was issued on the basis of scrutiny of documents submitted with Return filed by the party. In fact, the show cause notice specifically says that on verification of the original duty paying documents of inputs and accounts maintained by the assessee in RG 23A Part I and Part II, it was found that the assessee had wrongly availed the credit. However, the show cause notice dated 24-1-1996 was based on investigation conducted by the Department with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of these gate passes. There are no duplicate show cause notices and order in respect of these gate passes. Since there are no duplicate show cause notices and order-in-original on the same issue, the order in original cannot be set aside on this ground. 8. The next question to be examined is whether the demands are barred by limitation. The defence taken by the appellants is that RT-12 returns had been filed with copies of gate passes on the basis of which credit was taken and copies of RG-23A Part I and Part II. Therefore, suppression cannot be alleged. At this stage, it would be convenient and proper to reproduce the findings of the Commissioner in his order while confirming demand : 23.5.1 In the light of discussions above, and particularly in view of the following reasons the contentions of the party with regard to Annexure "A" and Annexure "E" to the SCN are not acceptable (i) There was manipulation in the description of items as well as with regard to the endorsement to the other company in the gate passes (original copy) mentioned in the Annexures A to E to the show cause notice. Thus, in respect of Annexure A, while the gale pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns conducted by the Department and the documents submitted by the appellants have not revealed all these facts and mere scrutiny could not have resulted in this finding. Therefore, we feel that suppression has been rightly invoked by the Commissioner in his order. Learned Advocate has cited the Apex Court decision in the case of Geo Foundations & Construction v. C.C.E., Pune - 2008 (224) E.L.T. 177 (S.C.) to support his argument that second show cause notice could not have been issued. We have already discussed this issue earlier but the judgment cannot be applied to the facts in this case since the second show cause notice issued to NRL is the result of the investigations conducted and the first show cause notice had been issued on the scrutiny of the documents submitted without any investigation whatsoever. In Geo Tech Foundations & Constructions case, no further investigation was conducted on the same set of facts and the second show cause notice invoking suppression was issued. Therefore, this judgment is of no help to the appellants. 9. The appellants have argued that the Department's contention that this is only paper transaction and no goods have moved according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t show any evidence of transport of goods to their units. In this case, all the appellants had to do was to show vehicles by which the goods were transported to their units after rejection by the buyers by producing the relevant transport documents such as bills, evidence of rejection by buyers, letter from the transporter that he had transported the goods. Learned Advocate submits that it is not his duty to provide evidence but it is for the department to prove the case against the party that and all he had to do was to show evidence relied upon by the department is not sufficient. In this case, the Department has been able to show after conducting enquiries that a Tempo No. GJ 6T 3078 had transported some goods two to three months before 19-9-1994 and at that time, no documents other than security pass were provided; that the tempo driver-cum-owner had stopped transporting goods since on one occasion, 80 bags were loaded instead of 40 bags; that the statement of driver of GJ 6T 3306 was recorded on 29-1-1994 and his owner said that their vehicle was never used; that the two vehicles viz. GRU 5702 is a Tipper and registration No. GCU 2122 was not allotted to any vehicle. None of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced in respect of purchases made from the appellants and it was noticed that no bills relating to the gate passes and consignments involved on the show cause notices were raised on the buyers and in respect of all of them these consignments were not received by them. Shri Doshi made a categorical statement that he had not placed any purchase order from both the appellants other than what has been reflected in the accounts. This would mean whatever has been ordered has been received by him. Unlike vehicles, it is noticed that in the case of buyers, 5 consignees namely, M/s. Bijal Agencies, Ahmedabad, M/s. Anand Associate, Ahmedabad, M/s. Adinath Chemicals, Ahmedabad, M/s. Jitesh Trading, Ahmedabad and M/s. Sweta Chem Ind., Ahmedabad had purchased H Acid Wet Cake involving duty of Rs. 12,02,857/- from show cause notice out of the total of Rs. 13,59,618/- in the case of SCCI which works out to 88% of the total modvat credit involved. In the case of NRL, these 5 buyers had accounted for 70% of the total duty involved in the disputed gate passes. The buyers who accounted for such large quantity from the two appellants in this case and who had regular transactions with them would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum up are that the consignees did not receive orders for the goods; that gate passes were not endorsed by the consignees; that there was no documentation to show that the goods were supplied to the consignees; that no explanation has been forthcoming for modifying the description of the goods; that no explanation has been given for dispatch of "Wet Cake" to another sister unit instead of bringing it back to the same factory; that no evidence has been produced by the appellants to show that the goods were received back by producing transporters bill, etc. We think that this is enough to show that the credits taken by the appellants were irregular, there was suppression of facts and therefore, the extended period is invocable and the demand has been rightly confirmed by the Commissioner. 13. Once the suppression is upheld and the Commissioner's order is valid, penalties imposed on the director and the employees has to be upheld since there is no dispute about the role of the director and the employees. The penalties imposed are not excessive and reasonable and therefore, we do not see any reason to interfere with this aspect of the order. 14. In view of the above discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned advocate that when the goods are rejected by customers, there cannot be any entry of the same in their record, inasmuch as according to the appellant, the goods were rejected without taking the same in record. In addition, the appellants have also shown that the enquiries were made with the transporters and they have established that a statement of one of the transporter is not correct. In any case, neither the customer nor the transporter or driver, were offered for such cross examination, and their statements being in the nature of co-accused, cannot be made sole basis. Duty paid by one unit is taken as Modvat credit by the other unit, thus leading to revenue neutral situation, in which case, the demands of duties are not justified. 18. I further find that admittedly the inputs shown to have been received by either unit must have been reflected in their raw material account and shown to have been utilized in the manufacture of the final product, cleared on payment of duty. In this scenario also, there can be no motive of the appellant to pay duty from one unit, take credit for the same in their other unit and then again pay duty on the final product manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice, issued after normal period, cannot be upheld. 21. As I have already held in favour of the assessee on merit as also on limitation, there is no justification for imposition of penalty upon all the appellants. The impugned order is set aside except for confirmation of demand of duty of Rs. 1,03,450/- which is not being contested by the appellant. DIFFERENCE OF OPINION Whether the appeals are required to be rejected as held by learned Member (Technical) or the same are to be disposed off in manner as held by Member (Judicial)? 22. [Per : P.G. Chacko, Member (J)]. - M/s. Shreeji Colourchem Industries (SCCI, for short) and M/s. Nandesari Rasayanee Ltd. (NRL, for short) are the main appellants in this batch of appeals. The other appellants are functionaries of these companies, who are aggrieved by the penalties imposed on them. Coming to the main parties, the facts of the case are interesting, but I would not like to reiterate the same as the essential facts are already contained in the orders recorded by the learned Members of the regular Bench. The impugned order of the Commissioner is in adjudication of a show-cause notice dated 24-1-1996, wherein varied dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting authority. This claim was contested by the department by submitting that there was no clearance of H. Acid by M/s. SCCI or M/s. NRL and hence there could be no physical receipt of the goods by M/s. NRL or M/s. SCCI, as the case may be, and, therefore, the MODVAT credits taken by both the parties were irregular. This case of the Revenue appears to be based on certain submissions of some of the third parties who are said to have rejected the goods received from M/s. SCCI and M/s. NRL. The appellants seek to rebut this case of the Revenue by submitting (a) that no oral evidence was gathered by the department from many of the buyers (third parties), (b) that "the few buyers, who wrote letters to the department to the effect that any gate passes issued by M/s. SCCI and M/s. NRL was not in their possession, had ordered for only a small part of the goods cleared by M/s. SCCI and M/s. NRL, (c) that no statement was recorded by the department from other buyers and (d) that the few persons whose submissions were 'allegedly against M/s. SCCI and M/s. NRL were not cross-examined. 25. Apart from reiterating the above case of the appellants, the learned counsel invites my attention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- also. The second show-cause notice is beyond the normal period of limitation and the same invoked the extended period of limitation on the ground of suppression of facts etc. According to the learned counsel, all the relevant facts were know to the department inasmuch as those facts were alleged in the earlier show-cause notice dated 26-7-1994. There was no suppression whatsoever by M/s. NRL and, therefore, the demand made against them in the second show-cause notice to the extent of Rs. 10,92,824/- is not enforceable against them under the proviso to Section 11A(1) of the Central Excise Act. In this connection, the learned counsel has relied on the Tribunal's decision in Commissioner of Central Excise, Indore v. Siddharth Tubes Ltd. [2004 (170) E.L.T. 331 (Tri.-Del.)] wherein, after taking note of an earlier show-cause notice having been issued to the party on the same facts as alleged in the subject show-cause notice which invoked the larger period of limitation for demand of duty, the Tribunal held the demand to be time-barred. This case of the learned counsel is quite acceptable. 27. He has also pointed out that the difference between the above two amounts was paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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