Customs, Excise and Gold Tribunal - Tamil Nadu
V.G. Paper And Boards Ltd. vs Cce on 18 March, 2005
Equivalent citations: 2005(192)ELT613(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants were engaged in the manufacture of paper falling under Chapter 48 of the Central Excise Tariff Schedule. In March, 1999, the department found that, in respect of certain capital goods received in their factory on 21.9.1996 and 14.8.1996, they had indicated in their Modvat declarations filed under Rule 57T that the said capital goods had been received on 2.12.1996 and 25.11.1996 respectively. Thus it was detected that the declarations were filed beyond the period of three months (prescribed under Rule 57T) from the dates of receipt of the capital goods. The party requested for condonation of this delay, which was allowed by the Assistant Commissioner. Thereupon, the assessee took Modvat credit on the capital goods. However, they reversed this credit later on when confronted by Audit objection. Subsequently a show-cause notice was issued by the department on 28.2.2001 proposing to disallow the above credit (Rs.9,68,200/-) and imposed a penalty. These proposals were upheld by the original authority which ordered recovery of Rs. 9,68,200/- and imposed a penalty of equal amount. Aggrieved, the party preferred an appeal to the Commissioner (Appeals), contending, inter alia, that the Modvat credit was not deniable to them in view of the Tribunal's Larger Bench decision in the case of Kamakhya Steels (P) Ltd. . The appellate authority rejected the contentions and recorded a finding that the appellants had intentionally misdeclared the dates of receipt of the goods in order to circumvent the statutory time limit for filing Modvat declaration. On the basis of this finding, the lower appellate authority upheld the order of the original authority. Hence the present appeal.
2. Ld. Counsel for the appellants submits that the delay of filing of Modvat declarations had been duly condoned by the Assistant Commissioner and that decision was never reviewed or revised. In the circumstances, according to the ld. Counsel, it was not open to the department to deny the Modvat credit to the appellants on the ground of delayed filing of Modvat declaration. This argument is contested by ld. DR, who submits that the appellants had fraudulently indicated wrong dates as dates of receipt of the capital goods with clear intent to get over the bar of limitation (for filing declaration) provided under Rule 57T. In view of this fraud, according to ld. DR, it was open to the department or recover the credit wrongly availed and to impose penalty on the assessee for irregular availment credit, without any review or revision of the Assistant Commissioner's order of condonation of delay of declaration. In this connection, ld. DR relies on the Supreme Court's Judgment in the case of UOI v. Jain Shudh Vanaspati Ltd. , wherein it was held that, without the order of clearance under Section 47 of the Customs Act being revised under Section 130 of the Act, the importer of the goods could be called upon to pay short-paid duty under Section 28 of the Act where it was found that clearance of the goods was obtained fraudulently. The DR submits that the Apex Court's ruling in the customs case of Jain Shudh Vanaspati Limited was followed by the Court in a Central Excise case vide CCE, Bhubaneshwar v. Re-rolling Mills . Ld. DR also relies on the Supreme Court's Judgment in Commissioner of Customs v. Candid Enterprises , wherein, after finding fraud on the part of the assessee, the Court condoned the delay of an appeal of the department. In his rejoinder, ld. Counsel cites the following decisions in his endeavour to get over the case law cited by the DR.
(i) India Pistons Limited v. Asst. Collector of Central Excise, MadrasII .
(ii) Kaziranga Tobacco Products P. Ltd. v. UOI .
In both these cases, it was held that Assistant Commissioners had no power to review their own orders.
3. I have carefully considered the submissions. The capital goods were actually received in the appellants' factory on 2.1.1997 and 20.12.1996 respectively. If these dates were to be reckoned, there was no delay in the filing of the declarations. But the fact remains that the declarations were filed long after the condonable period of limitation of three months reckoned from the dates of actual receipt of the goods in the factory. The party requested for condonation of the delay, when it was pointed out to them that their declarations were highly belated. This request was granted by the Assistant Commissioner. Subsequently, the assessee took the Modvat credit in question. What happened later has already been noted in this order.
4. The question of fact immediately arising for consideration is whether the assessee could offer any cogent explanation for the delay of their declarations. It is stated that the capital goods purchased by them were kept in the premises of their transporters till the goods were physically received in their factory. They, however, could not show that they had the requisite permission from the department for keeping the goods outside their factory. On a perusal of the records, it appears to me that the appellants have failed to offer valid explanation for the delay of the Modvat declarations in question. It is in this background that the relevant finding of the lower appellate authority has to be examined. That authority found that the appellants had wilfully misdeclared the dates of receipt of the capital goods in the factory with intent to circumvent the limitation prescribed under Rule 57T. This finding has not been successfully rebutted in the present appeal. The appellants' act of having misdeclared the dates of receipt of capital goods in their factory, to the department to make it appear that their Modvat declarations were within time is fraudulent in nature. As rightly submitted by Id. DR, where fraud is found on the part of an assessee, a corresponding benefit accrues to the Revenue as in the case of Jai Shudh Vnapsati Ltd. (supra). In the said case, the party had imported Palm oil in containers which were so painted as to make it appear that they were made of mild steel. Long after clearance of the goods, it was found that the containers were made of stainless steel, which was prohibited for import. Thus a fraud was detected. On this basis, the department issued two show-cause notices, one under Section 124 of the Customs Act for confiscating the goods imported in defiance of prohibition and the other under Section 28 for demanding duty on the goods. These notices were challenged by the party in a Writ Petition before the High Court, and the petition was allowed. The department approached the Supreme Court, which set aside the order of the High Court and allowed the proceedings under Sections 28 and 124 to continue, after rejecting the assessee's contention that it was not open to the department to proceed against them in that manner without revising Section 47 order of clearance of goods, under Section 130 of the Act. The apex Court held as under:
6. The case of the appellants in the show cause notices is that the stainless steel containers in which the said oil was imported were banned, that the stainless steel containers were deliberately camouflaged by panting them to resemble mild steel containers, and that this was done with a view to enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if I, in fact, be so) cannot debar the issuance of a show cause notice for confiscation of goods under Section 124. Fraud, if established, unravels all. An order under Section 47 obtained by the employed of fraudulent methods does not have to be set aside by the exercise of revision powers under Section 130 before the ill-effects of the fraud can be set right by initiation of the process of confiscation of the fraudulently cleared goods under Section 124.
Ld. DR has relied on the above ruling to support his argument that, as the appellants had fraudulently obtained the Assistant Commissioner's order of condonation of delay of Modvat declaration, it was not necessary for the department to review or revise the said order before proceeding against the party under Rule 57U for recovery of the wrongly availed credit and for penalizing the party for the offence. It has been pointed out that the above ruling rendered by the Apex Court in a Customs cases was followed by it in a subsequent Central Excise case after noting that Section 28 of the Customs Act was pan materia with Section 11A of the Central Excise Act. The argument of the ld. DR is, indeed, forceful and the same has not been effectively rebutted. The High Court's judgment in the cases of India Pistons Ltd. (supra) and Kaziranga Tobaco Products Pvt. Ltd. (supra) are not enough to dislodge the above argument of the DR. In these cases cited by ld. Counsel, what was held by the High Court was that the Assistant Commissioners had no power to review their own orders. In the instant case, it was an Assistant Commissioner who condoned the delay of Modvat declarations filed by the assessee. He had no power to review the said order. But this does not mean that his order of condonation of delay was not appealable. Such an order resulting in civil consequence for the Revenue was certainly a quasi-judicial order which could be appealed against. True, the department did not choose to prefer appeal against it. Now the question arises whether, without appealing against the Assistant Commissioner's order of condonation of delay of Modvat declaration, it was open to the department to recover the Modvat credit in question from the assessee on the ground that there was no valid declaration respect of the capital goods. This question, in my view, would certainly attract the ruling of the apex Court in Jain Shudh Vanaspati Ltd. (supra) inasmuch as the appellants secured condonation of delay of Modvat declarations in a fraudulent manner. Accordingly, I hold that it was open to the department to issue show-cause notice under Rule 57U for recovery of the credit and imposition off penalty, without having to get the'delay condonation order set aside in appeal. This benefit accrued to the Revenue from the fraud of the assessee. Therefore, I reject the appellants' contention that the department was not entitled to issue the show cause notice without getting the Assistant Commissioner's order set aside.
5. It is seen that there is no dispute of the fact that the declarations were filed long after the period of limitation prescribed for the filing of such declaration under Rule 57T. It is also not in dispute that the declarations were filed beyond the condonable period of limitation. In the circumstances, there is no reason to interfere with the decision of the lower authorities. Modvat credit was not admissible in the absence of valid declaration.
6. The lower authority ahs distinguished the case of Kamakhya Steels (P) Ltd. {supra) from the case on hand. The Larger Bench in the said case had held that the benefit of amendments brought to Rules 57G and 57T under Notification No. 7/99-CE(NT) was available to all pending Modvat cases. Accordingly, the amended (relaxed) rules were applicable to old Modvat cases pending on account of remand etc. According to the amended rules, Modvat credit could not be denied on the ground of deficiency of particulars in Modvat declaration and duty-paying documents, provided the substantive conditions for Modvat credit stood satisfied. The instant case is not one of deficiency of particulars of capital goods in Modvat declaration. It is one of want of declaration. It is in this manner that Id. Commissioner (Appeals) has distinguished Kamakhya Steels (supra). I do not find anything wrong with this. Moreover, in terms of the Supreme Court's ruling in the case of Jain Shudh Vanaspati Ltd. (supra), the benefit of Kamakhya Steels {supra) would not, even otherwise, be available to the appellants who disentitled themselves to such benefit by means of fraud.
7. The Modvat credit was reversed prior to show-cause notice. Ld. Counsel has argued that, in such a situation, penalty was not liable to be imposed on the ground of wrong availment of Modvat credit. Ld. DR has, no the other hand, submitted that the reversal of Modvat credit came after detection, by the department, of the assessee's fraud. In this area also, the Supreme Court's ruling seems to have a bearing and, therefore, I am unable to do away with the partly. However, the factum of reversal of Modvat credit before issuance of show-cause notice is recognizable as an extenuating factor for reducing the quantum of penalty. In the facts and circumstances already noted, I reduce the quantum of penalty to Rs. 3 lakhs. With this modification, the impugned order is sustained and the appeal is dismissed.
(Order dictated and pronounced in open Court).