Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs Lord Balaji Enterprises on 22 March, 2006
Equivalent citations: 2006(109)ECC314, 2006ECR314(TRI.-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. The subject appeal had been filed by the department against Order-in-Appeal No. 362/2004-CE dated 30.09,2004 passed the Commissioner of Central Excise (Appeals), Salem. In the Order-in-Appeal, ld. Commissioner has dropped the proceedings proposed in the show-cause notice against M/s Lord Balaji Enterprises. The case against the assessee was that in the year 1999, they had availed credit of duty paid on 'Bright Bars' to the tune of Rs. 22,769/- on the strength of fake invoices issued by M/s Jaiswal Engg. Work (P) Ltd., Jamshedpur. The original authority had confirmed the demand of duty and ordered recovery of the wrongly availed Modvat credit of Rs. 22,769/- under Section 57I invoking the larger period. He had demanded interest under Section 11 AB read with Section 38A of the Central Excise Act, 1944 and imposed penalty equal to the duty demanded in terms of Rule 57I of the Central Excise Rules, 1944. On appeal to the Commissioner (Appeals), he observed that the party had paid the duty due as per the invoices, under cover of which the assessee had obtained the inputs. The assessee had furnished the concerned invoices for defacement and they were duly defaced by the jurisdictional Range Superintendent. Long later in the month of Aug. 03, pursuant to investigations conduced at the supplier's end and on finding that the manufacturer of 'Bright Bars', had sent 'Bright Bars' to the assessee under fake invoices, a show-cause notice was issued invoking the larger period, to demand the duty, interest and to impose penalty. In the adjudication proceedings, the Commissioner found that the assessee had not committed any fraud in availing the credit. He also found out that the supplier had approached the Settlement Commission and had paid an amount of Rs. 35 lakhs (approximately) towards the duty liability on goods manufactured and cleared by him. Me was satisfied that the assessee had paid the duty due and had in no way colluded with the supplier in evading payment of duty. He relied on the ratio of the decision of the Eastern Bench of the Tribunal in IDL Chemicals Ltd, v. Commissioner of Central Excise, Bhubaneshwar and dropped the proceedings against the assessee. The IDL Chemical's case dealt with an identical case, where the assessee had paid duty on the inputs received against fake invoices, for recovering which a show-cause notice was issued invoking the larger period. The Tribunal had observed that the assessee had not made any mis-statement, or suppression of facts and larger period of limitation had been wrongly invoked.
2. Arguing the case of the department, ld. SDR stated that the assessee had availed credit against invalid documents and that duty had been correctly demanded. The fraud was found out only on investigation by the department and, therefore, the show-cause notice had rightly invoked the larger period. She pleaded that the order of the original authority has to be restored.
3. Arguing for the respondents ld. Adv. Shri J. Sankararaman pleaded that it is a case, where the assessce had paid the duty and received inputs under cover of invoices. The assessee bonafidely believed that the document under which the goods had been received from a big manufacturer was genuine and so availed the credit. The assessee produced the invoices on which credit was taken for verification and defacement by the Range Superintendent somewhere in 1999. Much later in 2003, a show-cause notice was issued alleging willful suppression, collusion etc., which was not justified. The supplier had committed a big fraud and the Commissioner (Appeals) himself had noted a liability of over Rs. 60 lakhs. Out of this, the supplier-manufacturer paid Rs. 35 lakhs for settling the case before the Settlement Commission, Principal Bench, New Delhi. He cited a few case laws to support the claim that the show-cause notice was time barred. He also cited the case law of IDL Chemicals Ltd, (supra), which dealt with an identical case.
4. I have studied the arguments of both the parties. It is seen that the assessee availed credit against documents under cover of which, he also received the inputs covered by the invoices. The invoices were scrutinized and defaced by the department. The supplier-manufacturer was under investigation for fraudulent clearances and he had approached the Settlement Commission, New Delhi and paid Rs. 35 lakhs for the clearances made without payment of duty. Naturally, the amount covered by the invoices involved in the subject goods should also be part of the demand on the supplier. Rule 57I provides for issue of notice to recover credit availed by willful mis-statement, collusion or suppression of facts on the part of the manufacturer/assessee. Such acts cannot be attributed against M/s Lord Balaji normal period as barred by limitation. It is seen that no notice was issued to recover the credit availed on an invalid document in time. The Eastern Bench of the Tribunal had made the following observations in IDL Chemicals (supra):
According to the appellants the show cause notice in the instant case issued under Rule 57-I of the Central Excise Rules, 1944 was barred by limitation. The Sub-Rule (1) of Rule 57-I as it existed at the time of issue of the show cause notice, required the notice to be served within six months from the date of credit. The show cause notice was issued long after the expiry of this period of six months. Evidently, reliance on the proviso to the Rule which enlarged the period of limitation to five years would arise only in cases of filful mis-statement, collusion or suppression of facts on the part of the manufacturer/assessee. The impugned order contained a finding that the appellants were guilty of wilful mis-statement, collusion or suppression of facts. There was absolutely no material before the Collector on the basis of which such a finding could have been recorded. Admittedly, the Cardboard Cartons were accompanied by duty paying documents stipulated in the proviso to Rule 57G(2) of the Rules. It is also in evidence that the appellants had paid to the suppliers the price of the Cartons as also the duty payable on the Cartons by Cheque. This is not a case where the suppliers and the appellants colluded together with a view to evade duty or deprive the State of the duty. The fact that the appellants had parted with the duty amount to the suppliers is sufficient to indicate fact that the appellants had parted with the duty amount to the suppliers is sufficient to indicate absence of collusion. We are unable to see any mis-statement or suppression of facts much less of any wilful nature, on the part of the appellants. In this view, the larger period of limitation in the proviso to Rule 57-I(1) of the Rules is not attracted to the case. We, therefore, hold that the show cause notice was barred by limitation.
I find that the subject case is squarely covered by the above decision. The Commissioner (Appeals) had correctly dropped the proceedings against the party. Accordingly, I dismiss the appeal of the department.
(Dictated and pronounced in open Court)