ORDER
J.N. Srinivasa Murthy, Member (J)
This is the party’s appeal against the impugned order, captioned above, dated 22-9-95 /5-10-95 for quashing the same (setting aside) and to hold, Modvat credit is correctly taken, and admissible, and no proper investigation is made, and glaring omission are not explained, and impugned order proceeds on presumption against the evidence, ignoring normal practice in manufacturing industry and for such other relief deemed fit.
1. Facts of the case in brief are that appellant manufactures Switch Mode Power Supply falling under chapter heading 85 of Tariff Act, 1985, under Registration No. CEX/RII/KIII/D 1/33/92 (ECC No. 0210020456) and avail Modvat facility under Rule 57A of Central Excise Rules and filed declaration of raw materials under Rule 57G on intelligence gathered that appellant is adopting some fraudulent malpractices in that regard, and investigations were carried out by preventive staff of Div. K III. The statement of Purchase Manager Shri Raju Kishandas Bhatia, under Section 14 of Central Excise Act, it disclosed that between October, 1989 to November, 1991, appellant factor}’ has received subsidiary gate passes from various stockists. Whereas goods/inputs were received from M/s. Mahalaxmi Aluminium Centre, Bombay-2 and Vimal Steel Corporation, Bombay-2 under their Invoices and delivery challans and payments were made to actual suppliers. No payments were made to suppliers of subsidiary gate passes, which cannot be treated as valid duty paying documents, and Modvat availed in such document is not admissible and irregular as party applying for subsidiary gate passes and party issuing Invoices/Delivery challans accompanying the goods are different. Rule 57G was contravened by appellant. Collector issued show cause notice on 3-2-94 under Rule 57-I proviso read with proviso to Section 11A(1) of Central Excise Act along with Annexure ‘A1 to show cause why Rs. 1,17,020.52 should not be recovered/reversed, and penalty under Rule 173Q(bb) should not be imposed to the appellant. It was replied on 5-4-94. Personal hearing was held on 19-6-95, 20-7-95 and 28-8-95. Appellant’s Excise clerk Shri Raj G. Chavan, Shri. R.J. Parekh, advocate attended and filed the written submissions. They were heard. On considering all the available material on record, impugned order was passed, confirming the demand under Rule 57-I read with S. 11A (1) proviso of Excise Act and imposing penalty of Rs. 20,000/- under Rule 173Q of Central Excise Rules. Hence this appeal.
2. Shri R.J. Parekh, learned counsel for appellant filed list of events and dates, and main contention of both sides, and argued that during 1989- 91 there was no Excise Control. Modvat could be taken on gate passes or subsidiary gate passes, or certificate issued by Superintendent. Mahalaxmi Aluminium Centre was the main supplier of Aluminium sheets, Profile flats and Sections. When it was not available, stockists (small shop) used to send them under subsidiary Gate Passes. Payment was made to supplier. Receipt of goods from stockists (small shop) of supplier was procedurally correct. Main supplier has not sent the inputs, as contended by department. If he had sent, GP used to be accompanied. Regarding time-bar aspect, statement recorded is misinterpreted. Cross-examination was not given, though asked for, 1999 (33) RLT 552 covers this case. Shri. K.L. Ramteke, learned JDR for Respondent has urged that as per order impugned goods were received with Delivery Challan. Subsidiary gate passes were sent later on. Goods shown in them are different. Suppression of practice is clearly made out. Modvat is correctly denied. Case law deals with agency, which is not available in this case. Limitation issue is based on different ground. In the reply, it is clarified. Goods shown in subsidiary Gate Pass and Delivery Challan tally in the description though quantity differs. Invoice/Delivery Challan was sent by Main supplier through stockist (small shop). There is no investigation on these activities with the appellant. No statements are recorded. Case is vague.
3. Point for consideration is whether there are sufficient and satisfactory goods to set aside impugned order? My finding thereon is in the affirmative.
4. Perused the statement of R.K. Bhatia, Ex. Purchase Manager, dated 26-11-93. Show cause notice 3-2-94, Reply 5-4-94, written submission 28-8-95. Impugned order and appeal memorandum and R 57-I, 57G, S.11A of Central Excise Act and 1999 (33) RLT 552 (T) in the case of Shri Ranjit Singhji v. CCE, Pune II in para 6 it is held that “Modvat Credit – Demand under rule 57-1 of Central Excise Rules – not bring to the notice of department. Payment made to agent of supplier of inputs and arrangement of procurement through an agent – not amounting to suppression for purpose of Modvat credit”. Extended period not invokable. It is considered in the below paras, on facts of both cases, and general principle laid down and discussed for applicability or not.
5. Let me first consider the question of limitation period involved is October, 1989 to November, 1991. Show cause notice is dated 3-2-94. As per para 10 of it, reply should be filed within 30 days from the date of receipt of the same. Reply is filed on 5-4-94. As per para of show cause notice extended period is invoked on the ground that – “the fact of different sources from where subsidiary gate passes were applied and the source of receipt of goods were received along with delivery challan/Invoice” was suppressed by the appellant. In the reply it is denied, and in para 4 it is stated that there is a complete misunderstanding of the facts. Goods have been received under the cover of subsidiary gate pass from the party issuing the same. Modvat credit is correctly taken. Orders are placed on Dealers/Indentors, who in turn place orders on manufacturers, stockists, who supply the goods on subsidiary Gate Passes. Supply is made on the direction of dealers, stockists etc. on whom orders are placed. It is a common commercial practice for the buyer to place orders with wholesale dealers/Indentors, who in turn place orders on the manufacturers or stockists. Other person in possession of goods to deliver the goods on proper duty paying documents. Because invoice is received from different party cannot lead to conclusion that goods have not been received from the person issuing subsidiary Gate Passes. The matter was previously taken up before the Tribunal on Tata Iron & Steel Co. Ltd., in which it is ruled that it is immaterial who issues Invoices, so long as the goods are received under proper duty paying documents in 1993 (66) E.L.T. 622, enclosed for reference. In page 10 of the Impugned Order the Collector has observed that – ‘During the period appellant was aware that the document which actually covered the goods was Invoice, and not such subsidiary gate pass. Knowing this fully well, they persisted in claiming on the former documents. This amounts to suppression of facts and misrepresentation with intent to procure/elicit the benefit of Modvat”- on this count proviso to Rule 57(1) read with provision of S. 11A(1) of Customs Act is rightly invoked. In response to that, appeal memorandum ground II in Page 11 states that the case of secret information by department is patently false made without proper application of mind. Enquiry started on 26-11-93 when statement of Shri R.K. Bhatia was recorded. Show cause notice is for October, 1989 to November, 1991. Secret information would pertains to 1993 i.e. just prior to date of statement. Falsity of information is exposed by covering October, 1989 to November 1993 in show cause notice. Similar enquiries were made with numerous other manufacturers and show cause notice and demand on the basis are issued. There is not only no wrong doing but also no suppression of facts, and demand is time-barred.” So from the above it is clear that there is no question of suppression at all to invoke extended period. This is further supported by Synopsis of appellant in Page 3 that – “CCE alleges that appellant had concealed the fact that appellant were placing orders on Mahalaxmi Aluminium Centre and making payment to the said party, but were receiving goods under subsidiary Gate Pass/Certificate from other parties and hence longer period under proviso to S. 11A(1) Central Excise Act is applicable”. In page 4 appellant has replied that – “There can be no suppression with intent to evade duty, if some facts is not declared, which is not required by law to be declared”. So from this it is seen omission is accepted. Whether it amounts to suppression or not is to be seen. 1999 (33) RLT 552 the case of Shri Ranjit Singhji v. Commissioner of Central Excise, Pune II Para 6 answers it in the negative. Even though agency is involved like a stockist (small shops) in the case on hand there is not much difference, as stockist/dealer acts on the direction of manufacturer. General principles laid down in the above case law clearly applies to this case. Apart from that facts leading to suppression differs from show cause notice and impugned order as narrated above. As per show cause notice different source of applying for subsidiary Gate Pass and source of receipt of goods along with delivery challans was suppressed. As per impugned order appellant was aware that during relevant time proper duty paying documents was invoice, still appellant persisted claiming Modvat credit on subsidiary gate passes. So there is no consistency and clear case of the department in that regard. There is no reason as to how 1989-91 dealings of the appellant got the attention of department only in November, 1993, when investigation was started by recording statement under Section 14 of Excise Act which is the only basis for the case. As contended by the appellant, if at all secret information was received it must pertain to immediate past period, not 2 to 4 years back. The probability of case is in favour of appellant. The demand is time-barred. On that ground, impugned order cannot stand. The contention of appellant is upheld. Point raised is answered in the affirmative. Hence I pass the following order.
ORDER
For the reasons discussed above impugned order is set aside, and appeal is allowed with consequential relief, if any, according to law.