Customs, Excise and Gold Tribunal - Delhi
Samsung India Electronics Ltd., Samtel ... vs Commissioner Of Central Excise on 28 October, 2003
Equivalent citations: 2004(92)ECC182, 2004(164)ELT261(TRI-DEL)
JUDGMENT P.S. Bajaj, Member (J)
1. The above captioned three appeals have been filed against the common impugned order-in-original by the appellants vide which modvat credit of the disputed amounts had been denied to appellant No. 1 with penalty and penalties have been imposed on the other two appellants as detailed therein.
2. Appellant No. 1 is a company engaged in the manufacture of Colour Television Sets (in short referred as CTVs) falling under Chapter Heading 8528.90 of the CETA. They had been availing the benefit of modvat facility on the colour picture tubes (in short CPTs) which they purchased from the companies appellants 2 and 3 who are engaged in the manufacture of the same during the period in dispute (May 97 to January 99). They availed modvat credit in all of Rs. 77, 18, 690.67 on the duty paid CPTs which they bought from appellants 2 and 3. On carrying out checking of the factory premises of the company appellant No. 1 on 19.9.97, and after recording the statement of their DGM Accounts, Shri R. Shridharan, it was revealed to the officers of the Central Excise that the company was not putting Sl. Nos. of the CPTs in the challans issued by them under Rule 57F(3)(4) or on any other document/packing list which were sent by them back to appellants 2 and 3 for repairs. The officers also found that in fact, there was replacement of the defective CPTs sent by the company appellant No. 1 to appellants 2 and 3 for reprise and those replaced CPTs were not cleared on payment of duty by the appellants 2 and 3 and as such, no modvat credit on the same could be legally availed by the company appellant No. 1. They also did not find any co-relation with the CPTs sent by the company appellant No. 1 for repairs and the CPTs thereafter received by them after the repair/replacement from appellants 2 and 3. The officers also conducted enquiry against appellants 2 and 3 and recorded statements of their officers and found that these appellants had in fact cleared new CPTs instead of carrying out any repair on the defective CPTs received from the company appellant No. 1, without payment of duty. On completion of enquiry, show cause notices were issued to all the appellants wherein the recovery of the modvat credit illegally claimed by appellant No. 1 along with penalty was proposed against appellant No. 1 and against appellants 2 and 3, imposition of penalty was only proposed.
3. All the appellants on receipt of the show cause notice contested the correctness of the allegations made therein. Appellant No. 1 maintained that the defective CPTs were sent by them after following the due procedure by issuing 57F(3)/(4) challans for repair and at that time they reversed 10% of the duty thereon and after receiving the same back from the appellants 2 and 3, they look back the credit of the 10%. They denied of having received the new CPTs instead of the same which they sent for repair. Similarly, appellants 2 and 3 also denied of having cleared new CPT's without payment of duty, to appellant No. 1 for the CPTs received by them for repair being defective. They alleged that after doing the repair, the CPTs were sent back under the same challan under which they received from the company appellant No. 1 and that all necessary entires at the time of the receipt of the defective CPTs and at the time of sending the same back after repair, were made by them.
4. The Commissioner who adjudicated the show cause notice did not accept the version of any of the appellants and passed the impugned order.
5. The learned Counsel has contended that there is no evidence on the record to prove that the company appellant No. 1 had received new CPTs instead of the CPTs which they sent for repair to appellants 2 and 3. He has also contended that there is also no material on the record to prove that the appellants 2 and 3 in a clandestine manner supplied new CPTs to the company appellant No. 1 in lieu of the defective CPTs received by them from appellant No. 1, for repair. The defective CPTs were received by these appellants under 57F(3)/(4) challans from appellant No. 1, and the same were sent back by them to appellant No. 1 under the same challan after doing the necessary repair work. Therefore, neither modvat credit could be denied nor any penalty could be imposed on any of the appellants by the adjudicating authority. The impugned order deserves to be set aside.
6. On the other hand, the learned JDR has reiterated the correctness of the impugned order and maintained that complete particulars especially the identification marks/Sl. Nos. of the CPTs were neither mentioned in 57F(3)/(4) challans issued by the company appellant No. 1 while sending the defective CPTs to appellants 2 and 3 nor by the latters (appellants 2 and 3) while clearing the defective CPTs from their factory after doing the requisite repair work and as such they had failed to prove the co-relation between the CPTs sent for repair and the CPTs received after repair by the appellant No. 1. He has also contended that there was in fact an understanding between appellants 1 and 2 which was arrived at after the meeting of the representatives of both the companies under which appellant No. 2 undertook the replacement and not the repair of the defective CPTs as and when received from the company appellant No. 1 and this understanding is enough to substantiate the allegation as made out in the show cause notice against both the appellants for denial of the modvat credit and imposition of the penalty.
7. We have heard both the sides. The denial of the modvat credit to the company appellant No. 1 of the amount in dispute has been made mainly on two ground; firstly, that the identification marks/Sl.Nos. of the CPTs were not mentioned in the 57F(3)/(4) challans while sending the same to appellants 2 and 3 for repair and secondly that the appellants 2 and 3 in fact did not carry out any repair of those CPTs but cleared the new CPTs to the company appellants No. 1. Similarly, penalty has been imposed on appellants 2 and 3 on the ground that they in fact in the guise of repair, cleared new CPTs to appellant No. 1 from their factory premises without payment of duty and thereby helped appellant No. 1 to avail wrongful modvat credit. But we do not find any tangible and convincing evidence on the record to substantiate these grounds. The initial receipt of the CPT's by appellant No. 1 on payment of duty from the manufactures appellants 2 and 3 remains undisputed. They, therefore, were entitled to take credit on the duty paid CPTs under the law. We find that some of the CPTs received by them were found to be defective and they sent back to appellants 2 and 3 for repair under 57F(3)/(4) challans, after making relevant entries also in the 57F(4) register and after reversal of the credit amount. The mere lapse on their part in not mentioning the identification marks/Sl.No. of the CPTs in those challans, itself did not lead to the conclusion that no CPTs were actually sent by them for repair to appellants 2 and 3, especially when it had not been alleged in the show cause notice.
8. Similarly, regarding the receipt of the new CPTs by appellant No. 1 instead of those very CPTs which they sent for repairs, to appellants 2 and 3, there is no evidence to prove the same. Appellants 2 and 3 have categorically denied of having supplied new CPTs in place of the defective CPTs, to the company appellant No. 1. On the strength of these very allegations that the appellant No. 2 had replaced with new CPTs instead of carrying out the repair work on the defective CPTs received from company appellant No. 1, after clearing from the factory without payment of duty, show cause notices for different periods were issued to them way back in the year 1994. But the then Collector of Central Excise, Meerut dropped the proceedings by holding that the allegations did not stand proved from the bald fact that they did not mention the identification mark/Sl.No. on the CPTs sent back by them after repair to the company appellant No. 1. That order of the Collector was upheld by the Tribunal also and the same is reported in 2000 (41) RLT 333. in the face of that order, it is legally not permissible to accept those very allegations against the appellant No. 2 of having not repaired the defective CPTs received from the company appellant No. 1, but replaced the same with new ones by clearing the same from the factory without payment of duty.
9. The learned JDR has not doubt laid much emphasis on the statement of Girish S. Shah, Manager Production of the appellant No. 1 recorded on 22.1.99 and the minutes of the meeting held on 8.5.98 between the representatives of both the companies (appellants 1 and 2 ) to contend that there was understanding that company appellant No. 2 would only to replace and not repair the defective CPTs as and when received from company appellant No. 1 and that the electrical defects and dents in the CPTs were even otherwise not repairable and as such there was no question of the repair of the same. But in our view his contention is wholly misconceived shri Girish S. Shah, Production Manager of the company appellant No. 1 has only stated that the electrical defects and dents in the CPTs were not repairable. But he has no where admitted that the defects found in the CPTs sent by the company appellant No. 1 to the company appellant No. 2, who supplied the same, were beyond repair and that those CPTs were replaced by the latter and not returned after carrying out the necessary repairs. The minutes of the meeting dated 8.5.98 referred by the learned JDR only shows that the company appellant No. 2 agreed to replace the defective CPTs received mainly from the Branch offices of company appellant No. 1, to whom the parts were also supplied. No doubt, the recording of the minutes of this meeting had not been denied by Shri Anil Dutt representative of the company appellant No. 2, but there is also no material on the record to suggest that if the same were given effect to. No irregularity in any statutory register especially regarding the receipt of the defective CPTs and clearance of the same again after maintained by appellant No. 2, had been found. No excess or shortage of the CPTs or OF the finished goods was detected by the officers of the Central Excise while carrying out the checking in the factory premises of the company appellant No. 1
10. It is also worthy to note that no DEMAND of duty has ben raised against company appellant No. 2 on the ground of having cleared new CPTs in the guise of defective repaired CPTs, to the company appellant No. 1 during the period in dispute. If the allegations of the Department are to be accepted, then they must have raised duty demand against them. As observed above earlier show cause notices issued to this company (appellant No. 2) on these very allegations were dropped by the Collector and that order of the Collector had been upheld by the Tribunal as detailed above. This circumstance is enough to belie the allegations of the Department against appellant No. 2 of having cleared the new CPTs in the guise of the repaired CPTs to company appellant No. 1.
11. In the case of company appellant No. 3 there is no admission of any of its representatives that the defective CPTs received by them from the company appellant No. 1 were beyond repair. The statement of only Shri Ravee Inder Singh Nirankari, Senior Executive of the company appellant No. 3 was recorded wherein he did to admit this fact at all. Rather he has given the procedure followed by his company on receipt of the defective CPTs from the customers. According to him, on receipt of the defective CPTs, at the gate, the documents are checked, verified and thereafter the consignment of the defective CPTs is allowed inside the factory. In the factory after unloading the consignment the CPTs are physically checked by the Customer Service Department and the report prepared by that Department contains the details of the Customers who had sent the CPTs, the gate pass and of the documents accompanying the CPTs, thereafter the defective CPTs are then examined to ascertain the nature of the defects by the Quality Control Department and after removing the defefects the CPTs are sent back . He has also stated that the entries at every stage are made in the relevant registers right from the date of receipt of the CPTs till the return of the same after removing defects to the customers. There exists no cogent reasons to disbelieve his version, especially when there is no evidence to falsify the same and to show if any defect or irregularity was found in any of the records maintained by his company, at the time of checking. No duty demand has also been raised against his company appellant No. 3 on the ground of having cleared new CPTs without payment of duty in the guise of repaired ones, to the company appellant No. 1.
12. Similarly, the company appellant No. 2 had also furnished the procedure followed by them on the receipt of the defective CPTs from the customers in their reply to the show cause notice. According to them the case sheet is prepared in respect of each consignment of defective CPTs received by them and entry in the relevant register is made. the defect is thereafter located in the CPTs by the Quality Control Wing of their factory and after carrying out the necessary repairs, the CPTs are sent back to the customers under the same challans. They have also alleged that where the defect is found to be beyond repair, it is only then the replacement of the CPT is made by them and at that time while clearing the new CPTs duty liability is discharged. No evidence has been brought on record to prove that this procedure was bypassed by them on receipt of the defective CPTs from the company appellant No. 1, for repair. As observed above, no irregularity in their procedure or in the register maintained by them regarding the receipt of the defective CPTs and return of the sand after repair, had been brought on record. No duty demand had also been raised against appellant them.
13. The CPTs after repair were cleared by both these appellants 2 and 3 under the same 57F(3)(4) challans under which they received from appellant No. 1. The non-mention of the identification mark or Sl. No. of the CPTs by the mat the time of sending back the same after repair did not warrant a presumption which has been drawn by the adjudicating authority, that those were never repaired but replaced by them.
14. The ratio of law laid down in Vikrant Tyres Ltd. v. Collector of Central Excise 1991 (56) ELT 860, Bharat Berg Ltd v. CCE, Allahabad 1995 (80) ELT 312 and Escort Employees Ancillaries Ltd. v. CCE, New Delhi 1999 (107) ELT 158 referred by the learned JDR is not attracted to the facts of the present case. In the first case there was no evidence to prove that the goods after reprocessing were actually received by the sender or not and for that reason credit was denied. In the other two cases, the issue involved was quite different altogether. In the instant case in the light of the discussion made above, the allegations as set out against the appellants in the show cause notice for denying the modvat credit to appellant No. 1 and imposition of penalties not only to this appellant but also on appellants 2 and 3, do not at all stand proved.
15. Therefore, the impugned order-in-original cannot be sustained and the same is set aside against all the appellants. The appeals of the appellants are allowed with consequential relief, if any, permissible under the law.