ORDER
K.S. Venkataramani, Member (T)
1. The appellants herein are engaged in the manufacture of steel structures and parts thereof classifiable under Chapter 73 of the Central Excise Tariff Act. They are availing of Modvat credit facility on their inputs under Rule 57A of the Central Excise Rules. The departmental officers verified their records for the period 1990-91 to 1992-93 and found that in their declaration under Rule 57G for Modvat purposes, the appellants had declared unwrought Zinc as one of their inputs. It is found that between 5-3-1991 to 30-8-1992, the appellants had received certain quantities of zinc ingots and took deemed credit thereof amounting to Rs. 99,898/-. The deemed Modvat credit is taken in pursuance of the order of the Government of India under Rule 57G, which is by way of exception to the requirement under the Modvat Rules that input duty credit can be taken only when such inputs are received under cover of document evidencing payment of duty. In respect of notified inputs, duty can be taken without production of such duty paid document. The department conducted enquiry relating to the supplies of the consignment of zinc ingots and found that the 2 suppliers M/s. Kothari Products (India) and M/s. Kothari Galvanisors have supplied the zinc ingots. Both these were registered small scale industrial unit and manufactured zinc ingots out of zinc ash. The department further found that the goods manufactured by these two small scale units were exempted from duty to a first aggregate value of first clearance not exceeding Rs. 20 lakhs in terms of Notification No. 175/86-CE. In such a situation, the department found that the bar in taking deemed credit contained in the Deemed Credit Order of the Government of India will apply in this case because the facility of the deemed credit is barred where it is shown that the inputs were clearly recognizable as being non-duty paid or wholly exempted or charged to Nil rate of duty. Since, in this case, the inputs received had been cleared at Nil rate under exemption, proceedings were initiated against the appellants for reversal of the Modvat credit amounting to Rs. 99,898/- by issue of show cause notice for the purpose on 6-8-1993 relating to the period 5-3-1991 to 30-8-1992. The show cause notice also invoked the longer period for recovery of the duty, charging the appellants the suppression of facts since they had suppressed the fact from the Department that zinc ingots which were purchased from these two suppliers had been cleared at Nil rate of duty. On considering the defence of the appellants, the Commissioner of Central Excise, Nagpur passed the impugned order dated 28-12-1993 ordering recovery of the duty in question under Rule 57-1 of the Central Excise Rules and also imposing a penalty of Rs. 10,000/- on the appellants herein under Rule 173Q of the Central Excise Rules.
2. Shri G.L. Deshpande, the ld. Counsel for the appellants, submitted that the demand raised by the department invoking the longer period under Rule 57-1 alleging suppression of facts by the appellants, is bad in law. The appellants herein have not suppressed any facts from the department. The concerned invoices for the receipt of the inputs on which deemed credit had been taken by them have been produced to the Department, which have been duly defaced. Some of the invoices are on record which show that in 1992 these invoices have been furnished and which have been defaced by the proper officer of the Central Excise. The ld. Counsel, further argued that even assuming that there was an omission on their part in not taking precaution of verifying that the inputs received from the suppliers had suffered duty, that will not make for a charge of suppression of facts against the appellants. It was obvious from the invoice that they are receiving from the suppliers and in such circumstances the assessee need not inform the department about it. He relied upon the Tribunal’s decision in the case of Tripty Drinks (P) Ltd. – 1993 (63) E.L.T. 101 (Tribunal).
3. Shri Gurdeep Singh, the ld. D.R. contended that the department was justified in charging the appellants the suppression of facts. He referred to the provisions of Rule 57-1 under which power is given for invoking the longer period, where there has been suppression of facts either by the manufacturer or by the assessee resulting into irregular availment of Modvat credit. Here the provision is slightly different from the provisions of Section 11A, in which suppression of facts with intention to evade payment of duty, is also a requirement. The ld. DR. submitted that the appellants were duty bound to verify whether the inputs had suffered duty, especially, when they were going to avail of deemed Modvat credit on the inputs. In this context, he cited and relied upon the decision in the case of Upper India Steel Manufacturing – 1990 (49) E.L.T. 23 to the effect that the assessee should clearly establish the duty paid nature of the input for claiming the deemed Modvat credit.
4. The submissions made by both the sides have been carefully considered. The issue is, whether the order for reversal of Modvat credit under Rule 57-1 invoking the longer period in the facts of this case, is correct in law or not? As indicated above, the appellants were availing of deemed Modvat credit, which is an exception to the general rule of Modvat Scheme and allows the manufacturer to take Modvat credit on the inputs covered by the Government of India’s order without insisting on producing documents evidencing payment of duty. But at the same time, such facility can be denied when it is shown that the inputs are clearly recognisable as having not suffered duty at all by way of exemption. The records show that the enquiries made by the department from these 2 suppliers involved in this case have clearly indicated that the inputs supplied by them to the appellants did not suffer any duty, because those two suppliers had cleared them under the duty exemption limit vide Notification No. 175/86 and they have so stated in their separate statements given to the department. The question is only one of limitation. On this aspect, the appellants’ claim is that they have submitted the invoice, under which the inputs have been received to the department which the department had initially accepted and hence they can not charge the suppression of facts. Examining this aspect, a perusal of the invoices of these two suppliers viz, Kothari Products (India) and M/s. Kothari Galvanisors, shows that Kothari Products described themselves as manufacturers and refiners of non ferrous metals & decorative articles. The invoice also indicates their SSI registration Number and address of the factory premises. The invoice of M/s. Kothari Galvanizors also gave the SSI registration number and the factory address. Therefore, the appellants, when purchased the zinc ingots from these two suppliers and especially when they were intending to avail deemed Modvat credit on this inputs, it is reasonable to expect the appellants to ensure that the inputs covered by the invoices have suffered duty so as to justify taking deemed Modvat credit in terms of the Government of India’s order, since they were claiming such deemed credit which also contained a bar to that credit where the inputs are clearly recognisable as non duty pad. A plea had been taken in reply to the show cause notice by the appellants that the invoices of M/s. Kothari Products only show that they were manufacturers of brass /copper cold rolled sheets and therefore it was presumed that they were not manufacturers of zinc ingots. However, a perusal of the invoice of Kothari Products No. 60/92-93 dated 22-6-1992 shows that they are described therein as manufacturers of non ferrous metals and brass/copper cold rolled sheets. So this plea taken does not have much substance. The position would have been different, had the appellants purchased the inputs from a dealer in the market, in which case, the burden would have been duly upon the department to show that the inputs are recognizable as non duty paid. However, the position as noted above is different in this case. In this case, the question of whether there had been suppression of facts, has to be looked into. The Supreme Court had occasion to interpret the expression ‘suppression of facts’ occuring in Section HA in the case of Pushpam Pharmaceuticals Company -1995 (78) E.L.T. 401. The Supreme Court held that the meaning of the expression ‘suppression of facts’ both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. The act of suppression, the Supreme Court held in the context of the proviso to Section 11A must be deliberate. It does not mean any omission. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done, does not render it suppression. Applying this ratio in this case, the fact that the inputs eminated from manufacturers and not from the dealers in market is known to both the parties, firstly to the appellants who chose to take deemed Modvat credit and secondly to the department. But the appellants had to make enquiries, it was something which they must have done viz. to ascertain that the inputs covered by those invoices had suffered duty. The appellants had not done so but had taken deemed Modvat credit on these inputs all the same. In such a context, it was not something the appellants might have done, but something the appellants must have done, before taking the deemed Modvat credit. Since they have failed to do so, it can reasonably be held that the department was justified in alleging suppression of facts by the appellants. Therefore, the order of the Commissioner reversing the Modvat credit taken on the inputs, is correct in law. The appeal is rejected.