JUDGMENT
Dalveer Bhandari, J.
1. This is an application under Section 35(G)(3) of
Central Excise & Salt Act, 1944 before this Court against
Reference Order No. R/34/99-NB(DB) dated 27.10.1999
bearing File No. E\2350/93-NB(DB) passed by the
Customs, Excise & Gold (Control) Appellate Tribunal.
2. The Tribunal incorporated the following
questions of law arising out of the Final Order No.
A/947/97-NB dated 5.9.1997:
“Where the statement of the representatives
of M/s. Baldev Metal Pvt. Ltd., M/s Bharat
Alloy Cast. Co., M/s. Metal Cast, M/s.
Simplex Traders remain uncorroborated by any
material evidence on record, whether it is
correct to hold that aluminium ingots and
zinc alloy ingots supplied by these
suppliers on the strength of their invoices,
are non-duty paid or having been cleared at
Nil rate of duty and thereby disallowing the
MODVAT credit on deemed credit basis to the
appellants in terms of Government order
F.No. 342/1/88-TRU dated 1.6.89 and F.No.
342/1/88 dated 12.7.90.
2. Where there exists no evidence with
regard to the above named three suppliers
having been engaged in the manufacturing
activities towards aluminium ingot and zinc
alloy ingots and the same also not been
verified by the Deptt. during the course of
investigation, as confirmed by the officers
during the cross-examination, is still
correct to hold that the supplies effected
to appellants by these suppliers were from
their manufacturing activities.
3. Before denying the MODVAT credit on the
invoices issued by the above named
suppliers, whether the Deptt. has
discharged the burden of establishing with
an acceptable legal evidence that such
suppliers are the manufacturer of aluminium
ingots and zinc alloy ingots and zinc alloy
ingots and further the goods supplied to the
appellants were infact from such alleged
manufacturing activity.
4. Where the Supdt. of Central Excise,
Preventive and the enquiry officer of
preventive, connected with case have deposed
during Cross-examination of having not
conducted any enquiries with regard to the
production capacity, power/electricity
consumed, books of account, verification,
number of workers if any employed by such
suppliers, should it not be held that there
is absolutely no evidence on record which
could establish such suppliers to be the
manufacturer of the goods supplied to the
appellants.
5. To a case where it does not stand
established about the goods supplied to be
non-duty, should be Hon’ble Tribunal
have not extended the benefit of deemed
credit and thereby quashing the order of the
Commissioner, Delhi for denial of MODVAT
credit and for imposition of penalty.
6. Where the invoices supplied by the
suppliers have been filed along with regular
monthly RT-12 returns and on the basis of
which deemed MODVAT credit availed and such
returns being assessed by the Range
Superintendent under Rule 173-1 should it
not have been held that the appellants could
not be charged with mis-declaration and
suppression and the extended period of five
years could not be invoked in the present
case.
7. Where the statement of Shri S.S.
Aggarwal, partner of the firm confirms that
he had no knowledge about the goods being
exempted and where the evidence on record
also does not suggest any such knowledge on
the part of the appellants or Shri
S.S. Aggarwal or any other partner and where
the monthly RT-12 returns filed or also
assessed under Rule 173-1, and where the
investigating officer did not verify from
Supdt. Range concerned with the assessment
of RT-12 returns about his knowledge, should
this Hon’ble Tribunal have not followed the
ratio of the decision even of the Apex Court
passed in the case of Collector of Central
Excise v. Vikash Gases Ltd., 1997 (95)
E.L.T. 457 (S.C.) and ratio in the case of
Rainbow Industries Pvt. Ltd. v.
Collector of Central Excise – wherein it has been held
that extended period of five years cannot be
invoked where the classification/price
list/assessments have been approved/assessed
by the Deptt.”
3. The Tribunal after hearing the learned counsel
for the parties and examining the evidence on record
came to the categoric finding that the petitioner
company is not entitled to the benefit of deemed credit
(Modvat credit) on the inputs which are clearly
recognisable as non-duty paid. The Tribunal further
mentioned that no substantial question of law arose in
the reference and according to the opinion of the
Tribunal, no reference is warranted in the instant case.
3. The petitioner company aggrieved by the said
order has approached this Court. It may be pertinent to
mention that during the pendency of this petition the
petitioner company filed an additional affidavit by
which the earlier questions of law have been discarded
and only one question of law was formulated. The same
reads as under:-
“Whether the extended period of limitation under
Section 11A(1) of the Central Excise Act, 1944 can
be invoked where the invoices raised by the
suppliers, on the basis of which the deemed
credit was being availed by the Applicant, were
regularly being filed with the monthly RT-12
Returns which were duly assessed by the Range
Superintendent under Rule 173-I of the Central
Excise Rules, 1944.”
4. The basic facts which are necessary to dispose
of the Reference are recapitulated as under:-
5. On 4.1.1992 the Central Excise Staff, New Delhi
paid a surprise visit to the factory premises of the
petitioner company. During the course of scrutiny of
records they discovered that the petitioner company is
taking benefit of Modvat credit on aluminium alloy and
zinc alloy ingots on the basis of invoices. Some of the
invoices showed that the suppliers were not traders but
manufacturers of the goods supplied by them on which
deemed credit was taken.
7. The partner of the petitioner company,
S.S. Aggarwal, in his statement dated 4.1.1992 recorded
under Section 14 of the Central Excise & Salt Act, 1944
explained the procedure and also stated that M/s Simplex
Traders, 11-A, G.T.K. Road and M/s Bharat Alloys and
Castings, Gali No. 9, Samaypur, Delhi-42 were the
manufacturers of aluminium alloy/zinc alloys purchased
by them.
8. The Collector, Central Excise, in his order
mentioned that the inputs purchased by the party from
M/s Bharat Alloys & Castings, Metal Cast, Simplex
Traders & Baldev Metals (P) Ltd., were clearly
recognisable as non-duty paid and exempt from duty in as
much as that M/s Bharat Alloys & Castings, M/s Simplex
Traders, M/s Metal Cast were neither licensee under
Central Excise as they have been availing exemption
under Notification No. 188/88-CE dt. 13.5.1988 for
manufacturing aluminium alloy/ingots/zinc alloys ingots
nor any duty was paid by them and further the goods
purchased from M/s Baldev Metal were also non-duty paid
and clearly recognisable as much, because they have been
receiving exemption certificate with each challan and it
was for the party to ensure that the inputs on which
they were availing deemed Modvat were not recognisable
as non-duty paid. It is clearly written on the invoices
of M/s Bharat Alloys and Castings, Metal Cast and M/s
Simplex Traders that they are manufacturer of the goods.
Obviously the party was required to obtain gate pass
when the goods are purchased from a factory and
non-receipt/procurement of the gate pass shows that the
goods were non-duty paid and the deemed Modvat was not
admissible. Similarly, the case of supplies by M/s
Baldev Metals, the goods were clearly recognisable as
non-duty paid.
9. The learned Collector, Central Excise, mentioned
that it appeared that the petitioner company has availed
inadmissible deemed Modvat credit during the period
6.5.1989 to 30.9.1991 and for the period 30.10.1991 to
24.1.1992. Learned Collector further mentioned in his
order that to avail the Modvat credit the input had to
be duty paid. It is further mentioned that the Modvat
credit was admissible only in respect of duty paid
aluminium/zinc alloys ingots and not on ingots which have
enjoyed the exemption. It is also mentioned in the
order that there was no doubt that deemed Modvat credit
was permitted to be availed on the specified goods but
it could be availed only if the goods are clearly
recognisable as duty paid. When both the type of inputs
that is duty paid and non-duty paid were available, to
avail of the Modvat credit the party was required to
procure only duty paid inputs. In the order it is also
mentioned that the petitioner company purchased the
inputs from there manufacturers mentioned above from the
market on which no duty was paid and hence deemed Modvat
credit was not admissible to them. It is also mentioned
that the petitioner company suppressed the material
facts from the department by misleading it as much as
the declaration filed under Rule 57(G) is with intent to
avail Modvat on duty paid goods which was, therefore,
acknowledged but in fact they purchased exempted
aluminium alloys/zinc alloys ingots and willfully availed
inadmissible Modvat credit thereon. So under Ruled
57(I) of the Rules read with Section 11A of the Act,
extended period of 5 years was liable to be invoked for
recovery of inadmissible Modvat credit availed by the
party.
10. The relevant portion of Section 11A of the
Central Excise & Salt Act, 1944 reads as under:-
“Section 11A. Recovery of duties not levied or
not paid or short-levied or short-paid or
erroneously refunded.
(1) When any duty of excise has not been levied
or paid or has been short-levied or short-paid or
erroneously refunded, a Central Excise Officer
may, within one year from the relevant date,
serve notice on the person chargeable with the
duty which has not been levied or paid or which
has been short-levied or short-paid or to whom
the refund has erroneously been made, requiring
him to show cause why he should not pay the
amount specified in the notice;
PROVIDED that where any duty of excise has not
been levied or paid or has been short-levied or
short-paid or erroneously refunded by reason of
fraud, collusion or any willful mis-statement or
suppression of facts, or contravention of any of
the provisions of this Act or of the rules made
there under with intent to evade payment of duty,
by such person or his agent, the provisions of
this sub-section shall have effect;
PROVIDED FURTHER where the amount of duty which
has not been levied or paid or has been
short-levied or short-paid or erroneously
refunded is one crore of rupees or less a notice
under this sub-section shall be served by the
Commissioner of Central Excise or with his prior
approval by any officer subordinate to him;
PROVIDED ALSO that where the amount of duty has
not been levied or paid or has been short-levied
or short-paid or erroneously refunded is more
than one crore rupees, no notice under this
sub-section shall be served without the prior
approval of the Chief Commissioner of Central
Excise;”
11. The petitioner company incorporated in the
petition that the Tribunal has erred in not referring
the questions of law which arose in the reference.
12. It is also incorporated in the petition that
before denying Modvat credit on invoices issued by the
above mentioned suppliers whether the department has
discharged the burden of establishing with an acceptable
legal evidence that such suppliers are the manufacturer
of aluminium and zinc alloy ingots and further the goods
supplied to the petitioner company were in fact from
such alleged manufacturing activity. It is also
incorporated in the petition that the petitioner company
has been regularly filing RT-12 Returns on the basis of
which deemed Modvat credit was availed and such returns
being assessed by the Range Superintendent under Rule
173-1. So the petitioner company cannot be charged with
misdeclaration and suppression and the extended period
of five years could not be invoked in the present case.
13. We have heard learned counsel for the parties at
length. The petitioner company availed of Modvat credit
on the goods supplied belonging to the category of
exempted goods, or in other words, where no duty was
paid. Obviously, the petitioner company could not avail
the Modvat credit on such goods. No fault can be found
in the respondents’ invoking Section 11A of the Act in
the facts and circumstances of this case because the
petitioner company suppressed the material facts from
the department by misleading it inasmuch as the
declaration filed under Rule 57-g is with an intent to
avail Modvat credit on goods on which no duty was paid.
14. The petitioner company was not entitled to the
benefit of Modvat credit which it has availed. In our
considered opinion, no interference is called for. The
reference is accordingly disposed of.