ORDER
J.H. Joglekar, Member (T)
1. On hearing Shri S.P. Sheth for the applicants and Smt. Reena Arya for the Revenue, the appeal itself was taken up for disposal.
2. M/s. International Solvent & Chemicals Co. are the agents of M/s. NOCIL, registered as ‘Dealers’ empowered to issue Modvatable invoices in terms of Rule 174 read with Rule 57GG of the Central Excise Rules, 1944. Invoice No. 153, dated 6-4-1999 was issued by M/s. NOCIL in the name of the dealers indicating payment of duty of Rs. 37,382/-. In terms of Rule 52A of the Rules, the duplicate copy of such invoice would be used for taking Modvat credit in terms of Sub-rule (3) thereof. The dealer however, made the requisite entry in his register on the strength of the original copy, the duplicate having been lost. This entry was made on 6-4-1999. On 10-5-1999 the dealer informed the Assistant Commissioner holding Jurisdictional order his area of the situation quoting Sub-rule (6) of Rule 57G of the said Rules, making a definite statement the physical goods were received in the traders’ godown. Against this receipt the dealer issued several invoices to other buyers. The Modvat credit transferred thereby amounted to Rs. 31,147/-. This credit was sought to be reversed by a notice under Rule 57-1 of the Rules and levy of penalty on them under Rule 173Q of the Rules was also alleged. The Dy. Commissioner passed orders confirming the duty and imposing penalty of Rs. 10,000/-. The dealers then filed an appeal. The Commissioner held as follows : –
“The question thereafter is whether credit wrongly availed of or utilised in an irregular manner could be recovered from the registered dealer. I find from a reading of the provisions of Rule 57-1 that recovery of irregular Modvat credit taken on account, inter alia, also applies to an “assessee” and registered person of a bonded warehouse, in addition to a “manufacture”. Assessee has been defined under Rule 2, Sub-rule (3) to mean a person who is liable for payment of duty assessed, and also includes any producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored. “Warehouse” is also defined to mean warehouse register under the provisions of Rule 140 of Central Excise Rules for storage of non-duty paid goods. Therefore, the appellant as a registered dealer under Rule 174 read with Rule 57GG of Central Excise Rules, will not be covered under the said Rule 57-1 ibid, for recovery of irregular credit. The liability imposed on the appellants on this account is therefore set aside”.
Hence the present appeal.
3. The Ld. Commissioner is quite correct in his interpretation of Rule 57-1 which does not permit recovery of Modvat credit wrongly taken by an account of a registered dealer. Infact where a user manufacturer has taken credit on account of a defective invoice given by a person under Rule 57GG of the Central Excise Rules the wordings of the provisions of Rule 57E are not capable of effecting variation of such credit wrongly taken by the user manufacturer.
4. The appellants question levy of penalty under Rule 173Q. Unfortunately the show cause notice does not specify which particular part of the imposing Rule relates to this situation. The provisions of Sub-rule (bb) are not attracted. It has to be kept in mind that within about 40 days of the taking of the credit under the original invoice and before the issue of the show cause notice the present appellant had applied to the Jurisdictional Assistant Commissioner as prescribed under Rule 57G(6) for regularisation of the activity. The rule as it then stood did not make the satisfaction of the Assistant Commissioner mandatory. There is nothing on record to show whether the concerned officers had made any verification of the claims as to the physical receipt of the goods. Therefore it could not be held that the dealer had taken impermissible credit nor can it be said that he had not kept due and proper account of the receipt and disposal of the goods. He had not recorded any incorrect particulars and that is also not the charge. Therefore his action of taking credit under the original copy of the invoice does not attract the provisions of Sub-rule (bb) or (bbb)(I) of Rule 173Q. The other Sub-rules would not apply at all. Therefore the rule does not empower the levy of penalty. The Commissioner’s order upholding the levy of penalty are not sustainable and are set aside. The appeal is allowed.