ORDER
P.K. Desai, Member (J)
1. For hearing the applicants’ appeal on merits, they are required to deposit a sum of Rs. 52,179/- by way of reversal of Modvat credit and Rs. 25,000/- towards penalty.
2. Shri Kohli, the ld. consultant, appearing for the applicants, submits that they have taken the credit on the Gate Passes issued by M/s. Resha Wires Pvt. Ltd. and those Gate Passes were duly authenticated and they have made the payment to the said party and if the said party has [fraudulently] used the old Gate Passes, the Department should realise the duty amount from the said party. In his submission therefore, there is no justifiable ground in raising the demand against the applicants. He also refers to the Order No. 379/93/WRB, dated 10-3-1993, where, according to him, in an identical situation, unconditional stay has been granted. He also referred to the decision of the Larger Bench in 1987 (28) E.L.T. 279.
3. After hearing both the sides, it appears that the allegation and the cause for raising demand calls for detailed [scrutiny]. The fact that the duty has not been paid by the suppliers, has come to the notice of the Department at a later stage and because the applicants are the persons who have availed of the Modvat credit, demand has been raised holding that the Modvat credit was not available, because the duty had not been paid by the supplier. When the fraud has been detected at the suppliers’ side, invoking the extended period for purpose of raising demand under Rule 57-I does not appear to be bad in law. In any case, whether extended period can be invoked becomes a debatable issue. Prima facie it appears that the applicants have taken credit of the duty which was paid to the Government exchequer. If the applicants have paid any amount to suppliers it may give [rise] to civil action. In so far as the Modvat credit is concerned, the only criteria to be examined is, whether the amount on which the credit has been taken, has been paid as a duty to the Government exchequer. If that is not done, the availment of Modvat credit may not be possible. The factual position in this case requires to be examined and a final conclusion can be drawn only thereafter. Prima facie, however, it appears that the amount demanded has to be secured. Under the circumstances, the applicants are directed to keep the amount of Rs. 52,179/- in their Modvat account. In case of any shortage in their Modvat account, they can cover up the amount by furnishing Bank Guarantee. They should report compliance within two months from the date of receipt of this, order. On reporting compliance, there shall be stay against recovery and waiver of pre-deposit of the duty as well as penalty amounts.