Customs, Excise and Gold Tribunal - Bangalore
Bellary Steels And Alloys Ltd. vs Commissioner Of C. Ex. on 22 August, 2003
Equivalent citations: 2003(157)ELT324(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. These appeals are being disposed off by this common order as they arise out of a common order filed by the manufacturing assessee, the Directors and other employees. The manufacturing assessee M/s. Bellary Steels & Alloys Ltd., Bellary (hereinafter referred to as M/s. BSAL) are engaged in the manufacture of various iron and steel rolled products from billets and are availing Modvat. They had also filed declarations and obtained registration as dealers in excisable goods and were eligible to issue invoices for the purposes of their buyers to avail Modvat credit.
2. It appears that on development of intelligence that 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 Nigarn 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 received in the factory or not.
(b) In order to adjust the quantity diverted to Bangalore without bringing the load to their factory, M/s. BSAL forged invoices, weighment slips and made fictitious entries in their inward registers, outward registers, RG 23A Pt. I, Form-IV and RG-1 to show as if the inputs were received in their factory. Later on, M/s. BSAL resorted to show them as cleared on payment of duty under cover of invoice raised under Rule 52A of Central Excise Rules, 1944 as manufactured by them. These invoices as raised by M/s. BSAL showed the dimension of billets as 100 X 100 mm as against the actual dimension of 125 X 125 mm, actually received by their customers. These billets were also invoiced to their customers as per the prevailing market price, which were higher than the price at which M/s. BSAL had purchased the billets from M/s. RINL.
(c) The enquiries revealed that M/s. BSAL paid duty at the enhanced value so as to enable their customers to avail Modvat. As such the duty debited by M/s. BSAL i.e., Rs. 73,50,976/- was higher than the Modvat availed by them i.e. Rs. 66,84,054/-. The said amount of Rs. 73,50,976/- was paid by them by debiting Rs. 42,85,687/- in RG23A Pt. II, Rs. 29,11,529/- in PLA and Rs. 1,63,760/- in RG 23C Pt. II.
(d) On the strength of the fabricated invoices raised by M/s. BSAL under Rule 52A, M/s. Loharu Steels, M/s. Kavita Sales Corporation and M/s. Nandi Steels, all situated at Bangalore, had availed Modvat credit, though the invoices did not accompany the consignment. M/s. Loharu Steel Industries converted the billets into Tor Steel and cleared the same from their premises under Rule 52A. Invoices were raised by the branch office of M/s. BSAL at Bangalore, as if the goods had been cleared from the factory of M/s. BSAL, Bellary, the appellants herein. Further, 100 X 100 mm billets manufactured by M/s. BSAL were cleared to M/s. Madanlal Steel & Forging Ltd., Madras who converted the said billets into rounds and cleared the later on payment of duty and consigned to M/s. Super Forgings and Steels, Madras. However, the invoices for the said clearances of goods were issued in the name of M/s. BSAL, Bellary. Inspite of the fact that the said rounds were not received in the factory of M/s. BSAL, but were consigned directly from the Madras factory.
(e) M/s. BSAL, Bellary availed Modvat credit 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 credit without receiving MS rounds from M/s. Madanlal Steels & Forgings Ltd., Madras.
(h) Annexures B1, B2 and B3 to the Show Cause Notice show the amounts of credit availed by the customers of M/s. BSAL on the basis of invoices raised by M/s. BSAL.
(i) In view of the above mentioned facts, M/s. BSAL, Shri S. Mad-hava, Managing Director, Shri G.D. Nandish, Assistant General Manager (Marketing) and Shri G. Basavaraj, Officer (Central Excise) were called upon to show cause to the Commissioner of Central Excise No. 71, Club Road, Belgaum-590 001 vide Show Cause Notice dated 4-5-98 as to why :-
"(a) A Modvat credit of Rs. 71,91,752.46 irregularly availed by M/s. BSAL as mentioned above should not be recovered/reversed/demanded from M/s. BSAL under Rule 57I(i)(ii) of the Central Excise Rules, 1944.
(b) Why an amount of Rs. 1,63,760/- being the Modvat credit availed by M/s. BSAL on capital goods and misutilised by them, for payment of duty on excisable goods neither manufactured/processed by in their factory nor removed from it, should not be recovered from them under Rule 57U(2) of Central Excise Rules, 1944.
(c) A penalty, equivalent to the Modvat credit irregularly availed should not be imposed on M/s. BSAL under Rule 57I(4);
(d) A penalty, should not be imposed on M/s. BSAL under Rules 52A(8), 57U(6), 173Q(1)(bb), 173Q(1)(bbb) and 226 of the Central Excise Rules, 1944, for the contraventions alleged in para 6 above;
(e) Why interest should not be charged on such irregularly availed Modvat credit as stated at (a) above from the 1st day of the month succeeding the month in which the credit was taken under Rule 57I(5) of the said Rules.
(f) Why interest should not be charged on the Modvat credit of Rs. 1,63,760/- (on capital goods) misutilised under Rule 57U(8) of the said Rules;
(g) A penalty on Shri S. Madhava, Managing Director, Shri K.C. Kondiah, Joint Managing Director, Shri G.D. Nandish, Assistant Managing Director (Marketing) and Shri G. Basavaraj, Officer (Central Excise) of M/s. BSAL should not be imposed under Rule 209A of the said Rules for contravention alleged in Para 6 above".
3. The Commissioner after examining the issues, found : -
(a) The appellants are a full-scale manufacturer paying substantial duty since 1993-94 when they went into production. Thereafter he recording 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-186/94/17467, 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, and that they had forged documents to lend credibility to their trading activities. The assessee's representatives and legal consultant have admitted all along that the facts mentioned in the show cause notice cannot be assailed on any count. The magnitude of their offences, commissions and omissions can be gauged and comprehended in full measure only against the background of the procedure laid down under Rule 57GG (as reproduced earlier in this order), and what had been carried on actually by the assessee.
21. On a comparison between the envisaged procedure under Rule 57GG and the facts of this case in a nutshell mentioned above, it emerges that there have been a series of misrepresentation of facts and suppression engaged in by M/s. BSAL for the motive of profit. It would be a travesty of law if such pre-meditated acts could be considered procedural irregularities as has been laid down by the pronounced law on the subject, to the viewed mildly.
22. The assessee in response to the Show Cause Notice had mentioned that all the facts alleged therein were accurate, but that there was no loss of revenue in spite of the admitted procedural irregularities. The matter emphasized by their consultant Shri B.V. Kumar, at the personal hearing was that they had paid higher duty of Rs. 6,66,922/- on the impugned consignments. The consultant had put forth that because of this, it was not correct to allege that the assessee had committed fraud, suppression and wilful misstatement of facts with the mala fide intention of evading duty payment. The consultant also referred to the intimation sent to the Range Superintendent dated 31-3-94, giving advance notice of their intention to carry out trading activities, to substantiate his contention of the bona fides of the assessee. Averring that there had not been any fraud, suppression, etc., the consultant put forth that the SCN was hit by limitation in that the demand had been made within the meaning of the extended proviso of Section 11A of the CEA, 1944. The main thrust of the defence therefor, was that there had been no suppression of facts, rendering the SCN not maintainable; that in terms of the case laws referred to below at (a) and (b), on the one hand Modvat credit could not be denied for procedural lapses and on the other that the procedure adopted by the assessee was as envisaged in the procedure for 'sale of goods in 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 Corporation 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-a-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 is ironical that despite a series of misrepresentations having been, as admitted, having been committed, the assessee has sought to repudiate the departmental resort to the extended period for demand claiming that there has been no suppression of facts.
25. I find that there have been commissions of a deliberate kind and as such the show cause notice is legally sustainable on the ground of invoking the extended meaning of the demand provision. The law laid down by the Hon'ble CEGAT in the case laws mentioned at (a) above that Modvat credit cannot be denied for procedural infractions is well known and is accepted. What needs to be seen here, is however, whether there were only technical infringements or whether there had been a pre-meditated attempt to orchestrate wholesale manipulations. The case laws referred to at (b) above deal with a bonafide fact situation, not when there has been a deliberate attempt at each stage to portray a fiction to mislead the department. From the foregoing facts and findings, it becomes clear that encouraged by the profit motive, M/s. BSAL had entered into a programme (howsoever ill orchestrated it would seem to be) to derive an unintended benefit. Rule 57GG is a facility extended to manufacturers to get input duty relief when the goods were procured from traders. The detailed procedure spelt out thereunder as reproduced earlier in this order, has been drafted only to pre-empt situations such as what we have in the present case. The very detailed wordings in these Rules, would clearly establish the apprehensions the department seems to have had of the likelihood of misuse of this new provision, which they have sought to overcome by laying down a comprehensive procedure, the need to adhere to which was seen to be crucial to this aspect of the Modvat scheme. It is for this reason that I find it difficult to categorise the case as being only of routine and technical infringements. The management of M/s. BSAL have more than anything shown a gross disregard for this well intended scheme in their established and admitted series of actions, driven by the monetary incentive. To view these as harmless technical infringements would therefore be to condone this deliberate cover up operation, It is mentioned there that the core of the Modvat credit scheme lies in the procedure stipulated therein. Most cases of irregular availment thereof would necessarily be infringement of some aspect of the laid down procedure. What needs to be considered is the distinction between bonafide 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 wore 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 manufactured/processed in their factory nor removed from the factory in terms of Rule 57U of the Central Excise Rules, 1944.
(ii) Considering the facts and circumstances of the case, the status of the assessee and the gravity of the offence committed by them, as found by him, imposition of penalty was found to be warranted in order to discourage such malpractices by others in the field. Accordingly, penalty of Rs. 50 lakhs under Rules 52A(8), 173Q(1)(bb), 173Q(1)(bbb) and 226 of the Central Excise Rules, 1944.
(iii) He did not find any reason to impose penalties under Rule 57-I(4)/57U(6), Rule 57-I(5) and Rule 57U(8). No interest was found to be demandable since these provisions were found by him to be not existing at the relevant period i.e. between March and September, 1995.
(iv) A personal penalty of Rs. 5 lakhs was imposed on Shri S. Madhava, Managing Director of M/s. BSAL under Rule 209A and similar amount were imposed on Shri K.C. Kondiah, Joint Managing Director. A penalty of Rs. 10,000/- was imposed on Shri G.D. Nandish, Asstt. General Manager and on Shri G. Basavaraj, Officer (Central Excise) under Rule 209A.
4. On hearing both sides and considering the material on record, it is found : -
(a) There is force in the submissions of the ld. Advocate that the penalties imposed on the Executives, of the appellant-company, under Rule 209A of the Central Excise Rules, 1944, is not maintainable, since no evidence has been brought on record in the impugned show cause notice or the impugned order to show that, they had reason to believe or had knowledge that, they were dealing with goods, which are liable to confiscation. The evidence placed on record in the form of statements do not indicate such knowledge. Under the circumstances, no penalty can be imposed on the Executives of the appellant-company under the provisions of Rule 209A of the Central Excise Rules, 1944. In this connection, the appellants reference and reliance upon the following decisions :
Applied Electronics ltd. v. CCE, Bombay-III [2001 (130) E.L.T. 500 (Tribunal) = 2000 (40) RLT 409 (T)] Killick Nixon Ltd. v. CCE, Aurangabad [1998 (97) E.L.T. 436 (T)] Standard Pencils Pvt. Ltd. v. CCE, Madras [1996 (86) E.L.T. 245 (T)] Totem Electronics and Ors. v. CCE [1999 (108) E.L.T. 277 (Tribunal) = 1999 (33) RLT 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. The Commissioner has not found and held any specific acts of commission and omission against the persons who have been visited with a penalty under Rule 209A. There should be a positive finding of the rules and knowledge and reasons to believe as regards specific goods, which are found as liable for confiscation, has to be arrived at to attract consequent penalties under Rule 209A. The findings of the Commissioner, have been extracted hereinabove in ex-tenso, these findings do not bring out any lucid clear and sustainable reasons as also for which alleged act of commission, omission or non-feasance, the penalty could be imposed on them. Therefore, the penalties imposed on the appellants under Rule 209A has to be set aside being not found to be sustainable in the facts of this case. The appeals of Shri S. Madhava, Managing Director, Shri Kondiah, Joint Managing Director, Shri G.D. Nandish, Asstt. General Manager and Shri G. Basavaraj, Officer (Central Excise) are therefore required to be allowed after setting aside the orders of penalties as imposed on them.
(b) After considering the allegations to the effect:
"The appellants have availed Modvat credit of Rs. 66,84,055/- on 5056.580 MTs of 125 X 125 mm billets, purchased by them from RINL without physically receiving the said goods in their factory. The said goods were diverted to Loharu Steel Industries, Kavita Sales Corporation and Nandi Steels Ltd., Bangalore. They also availed Modvat credit of Rs. 5,21,421/- on 284.938 MTs of rolled products purchased by them from Madanlal Steels and Forgings Ltd., Madras without actually receiving the said rolled products in their factory at Bellary.
The appellants have raised and issued modvatable invoices for the goods which were not removed/cleared/despatched from their factory and also abetted their customers in taking inadmissible Modvat credit on the strength of their own invoices which did not accompany the respective excisable goods. Thereby, the appellants passed on irregular (higher) Modvat credit.
The appellants have issued invoices bearing common running SI. Nos. from their Bangalore and Madras branch offices to show as if the same were issued from BSAL, Bellary.
The appellants have forged invoices, weighment slips and made false entries in their Inward Registers. RG23A Pt. I and II Registers, Form IV Registers, RG1 Registers to show as if the inputs, viz., 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 billets for the ease of transportation. This has not been found to be a false by the Commissioner. The billets, so purchased, cut and then transported were brought to the factory premises of M/s. BSAL and used. There is no controversy about the quantities so consumed and availment of Modvat on those billets. As regards the billets meant for trading, as per the understanding of the BSAL, they were sent directly to M/s. Loharu Steel Industries (said to be a job worker of BSAL), M/s. Kavita Sales Corporation and M/s. Nandi Steels, located at Bangalore under cover of photocopies of the invoices of M/s. RINL and to the Madras parties. However, such billets were transported from Visakhapatnam to Bangalore/Madras without bringing the same to their premises at Bellary, ostensibly to save on transportation, delays and other inconvenience costs.
(iii) Modvat Credit, however, was availed by BSAL only after receipt of duplicate/transporter's copy of the invoices issued by RINL and credit so taken were simultaneously debited/duty was paid on invoices thereafter issued by M/s. BSAL to the said job worker/M/s. Kavita Sales Corporation and or M/s. Nandi Steels.
(iv) Consequent to the modus operandi adapted by the appellants, they availed Modvat credit of Rs. 66,84,054/- on the quantity of billets not physically brought to the factory at Bellary. However, corresponding debits, amounting to Rs. 73,50,976/- were made. As admitted in the Show Cause Notice, this was made from RG23A Pt. II Rs. 42,85,687/-, RG23C Rs. 1,63,760/- and from PLA Rs. 29,11,529/-. Thus, it is an admitted position that, the appellants have in fact paid more duty effecting debit entries, than the credit taken by an amount of Rs. 6,66,922/-.
(v) It is a fact that debits have been made in RG23C register, when no goods were manufactured in the premises of BSAL. The amount debited in the RG23C register amounting to Rs. 1,63,760/- has reduced the balance of the amount available, on account of capital goods credit, with the appellants, by utilizing the same against these debit payments. This reduction in credit in RG23C accounts cannot be said to have adversely affected Revenue interests. This has, if at all, affected the interest of M/s. BSAL. As regards the debits made in PLA, the said payments are payments in cash. If the amount of Rs. 1,63,760/- of RG23C, is reduced from the excess amount debit 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, since, it was the duty of the Range Superintendent to have informed the appellants of the correct procedure to be followed by them when they intimated vide their letter No. F-186/94, dated 31-3-94, their plan to trade in excisable goods similar to the goods being manufactured by them. The Commissioner in his Order has extensively extracted the provisions of Rule 57GG and the conduct of the appellant being an assessee paying large amounts of duties since their inception. However, his order is delightfully silent as to what prevented his officers from educating the assessees and or whether in spite of such an education, having been imparted, the assessee continued to follow a procedure as per his own understanding and which may not be the prescribed procedure. The Department as facilitator for the trade has an obligation to guide the assessees.
(iii) When Revenue interest are not jeopardized, inasmuch as the appellants have paid more duty by following the procedures as adopted by them, there cannot be any case for penalty, for not following the correct procedure, which in any case was newly introduced and the appellants were not educated or informed about the same. Penalty is not a crop in hand, given to the officers, to crack, for demonstrating, to discourage others, as held in Para 29 by the Commissioner. Such penalties imposed as in the facts of this case are required to be set aside.
(iv) The Board's Instructions No. 96/7/95-CX., dated 13-2-1995 and 218/52/96-CX., dated 4-6-96 reinforces our view that there was nothing amiss in the goods having been transported from the premises of the supplier to the end users, without being brought to the registered dealers premises. As far as Registered Dealers conduct is concerned, the reliance of the ld. Advocate for the appellant on the following case laws :
Dr. Curies Labs Ltd. v. CCE, Hyderabad [1999 (112) E.L.T. 539 (T)]
Stamped P. Ltd. v. CCE [1998 (102) E.L.T. 466 (T)]
S.N. Suderson (Minerals) Ltd. v. CCE [2003 (151) E.L.T. 215 (T) = 2002 (53) RLT 905 (T)] M.P. Vegetable Fruits Products v. CCE [1995 (76) E.L.T. 393 (T)] Kathiravan Pipes Ltd., Star Marketing v. CCE [2002 (147) E.L.T. 1266 (T) = 1998 (27) RLT 820 (T)] Wipro Information Technology v. CCE [1999 (107) E.L.T. 467 (T)] Nicholas Piramal 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 penalty under Rule 52A(8) is not called for.
(iii) Rule 173Q(1)(bb) is applicable to an assessee. However, the Rule on plain reading indicates that it bars, taking of credit and its utilization, knowing that the same was not permissible. Since the credits on the duties shown on the invoices of M/s. RINL was taken and simultaneously reversed, not only in full measure, but, in addition, by an excess amount, and there is no charge of overdrawal of Modvat credit amount which could be arrived. The penalty under Rule 173Q(1)(bb) is not called for, since no irregular availment and utilization is established.
(iv) Rule 173Q(1)(bbb) is applicable to a Registered Dealer. The impugned order in finding at Para 25, while considering the material concluded with the following words ; -
"....... The trading operation carried on by M/s. BSAL is accordingly not recognized as such."
If that be the case, and the appellants are not recognized as a Registered Dealer, then penalty under Rule 173Q(1)(bbb) cannot be upheld.
(v) The finding in Para 25 of the findings in the impugned order also concludes: -
"I take the view that M/s. BSAL have availed of Modvat credit on inputs which were not received in the factory and were not used in the manufactures of final products as declared as alleged..."
and disregards the simultaneous debits, made in excess of the required amounts of the credits availed. An accounting entry incorrectly made has been corrected by corresponding debit entry simultaneously. Such accounting corrections cannot be a cause to visit a penalty under Rule 173Q(1)(bb).
(vi) The order of confiscation of demand of Rs. 71,91,752.46 made under Rule 57-I(1)(ii) of the Central Excise Rules, 1944 ordered by the Commissioner, as irregular Modvat credit availed by M/s. BSAL cannot be upheld since the show cause notice only quantifies that credit availed was Rs. 66,84,054/- by M/s. BSAL on the duty on billets sent to other parties. Rs. 73,50,976/- less Rs. 1,63,760/- i.e. Rs. 71,91,752.46 was the total debit made in RG23A and PLA in this case. The credit of Rs. 66,84,054/- availed in RG23A, if not permissible has already been reversed, by the debits made as recognized by the show cause notice. No further recoveries under Rule 57-I(1)(ii) were therefore called for.
(vii) As regards order of demand, 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, such direct supplies to job workers, without bringing the consignments to factory at Bellary was permissible. Therefore, the supplies made to M/s. Loharu Steel on invoices said to have been raised with a stamp 'for conversion' from their Bellary office and thereafter their sale from the premises of M/s. Loharu Steel to M/s. Sabeena Steels, Bangalore on M/s. BSAL invoices and or the conversion of the billets into rolled products purchased from M/s. Madanlal Steel & Forgings Ltd., Madras and sold on invoices of M/s. BSAL, as alleged in the show cause notice cannot be found fault with.
5. The ld. Advocate for the appellants stressed on the point of excess duty having been credited by adopting the present method to move the goods. Therefore, he submitted that there is no case for penalty and/or demand of the credits as made. In fact, they should get their amounts refunded which have been debited in excess. Since the question of refund was not before the lower authorities, this plea made at this stage cannot be entertained, if the appellants are entitled to any refund. On that account they may take recourse to such action as they may be advised. We refrain from giving any finding on this plea of refund.
6. In view of the findings as arrived at hereinabove, the impugned order is set aside and appeals allowed.