ORDER
Moheb Ali M., Member (T)
1. This appeal arose out of the order of Commissioner (A) who in the impugned order upheld denial of MODVAT credit of Rs. 9,48,397.54 and imposed an equal amount of penalty. Briefly the facts are as follows:
2. The appellant availed MODVAT credit on inputs such as Benzene, Toluene, H.C.I. Caustic Soda, Nitric Acid L.D.O. etc. on the basis of quantities shown in the Central Excise invoices under which they were received in his factory even though it was evident that the full quantity shown in the invoices was not received in the factory. The appellant in his statutory records showed the quantity as indicated in the invoices though in the private records he indicated the correct quantity received Further it appears the appellant was claiming compensation of amounts on the short received goods from the suppliers of the inputs. The modvat credit taken on the short received goods was worked out to be Rs. 9,48,379.54. In the impugned order the Commissioner (Appeals) confirmed the demand for this amount along with a penalty of equal amount . The Commissioner also upheld the lower authorities finding that extended period of limitation is invocable in the case inasmuch as the appellant suppressed the fact that he short received the inputs while taking full credit.
3. Heard both sides.
4. The Ld. Advocate for the appellant submitted that the lower appellate authority did not appreciate the fact that the appellant took only that much credit as indicated in the invoices; that the variation in weight/volume between the quantities received and dispatched was due to evaporation losses in transit; that the difference in quantity was due to difference in the calibaration of weigh bridges; that the supplier reimbursed only the value of the short received goods and not the Central Excise duty paid on it; that the decision of the Tribunal in the case of Bhoruka Textiles Ltd. v. Commissioner of Central Excise Bangalore [2000 (116) ELT 583 (Tribunal)] and the Commissioner of Central Excise and Customs, Aurangabad v. Sipta Coated Steel Ltd. [2000 (125) E.L.T. 578 (Tribunal)] wherein the Tribunal held that MODVAT Credit can not be denied on the minor variation in quantities received in a factory so long as full duty has been paid on the goods including on the goods short received; applied to their case that extended period is not invocable in as much as there was no suppression of facts; that the Commissioner’s did not rely on Commissioner of Central Excise , Rajkot v. Bombay Dyeing and Mfg. Co. Ltd. [1998 (97) ELT 101 (Tribunal)] which is applicable to the facts of this case and that for the purpose of availing credit are Central Excise invoices and these invoices documents and these documents clearly show the amount of duty paid on the inputs.
5. The Ld. SDR submitted that the private records maintained by the appellant clearly show the quantity received; that an assessee is entitled to take credit only when the inputs are received in the factory; that the appellant in the present case was claiming reimbursement from the supplier on the short received goods; that the case law cited by the appellant is only in respect of minor variation whereas in the present cases the variation is large and the Modvat credit on the short received goods was worked out to be over Rs. 9 lakhs; that the Commissioner rightly relied on the decision in the case of Bombay Dyeing and that larger period of limitation has been rightly invoked as the appellant was maintaining two sets of records, one for the consumption of the Department and another for his own.
6. We have examined the rival contentions Rule 57G permits Modvat Credit only on the goods received in the factory. Thus the primary condition is receipt of goods. The appellant himself agrees that he has not received the full goods mentioned in the invoices. He attributes the short receipt to temperature difference, transit losses, evaporation losses, difference in weighbridge calibration etc. If the reasons for short receipt of goods, are as stated by the appellant, no supplier would reimburse the cost. The fact that the supplier has agreed to do so clearly establishes that the loss of goods is not for the above reasons. The appellant also contends that the supplier has reimbursed the bare cost of the material and not the Central Excise duty paid on the short received goods. This contention has not been supported by any evidence. The case law cited by the appellant is applicable to minor losses, which have not been reimbursed by the supplier. The ratio cannot be applied in the case of short receipt of goods in all circumstances. Further the Rule position is (Rule 57G) very clear in this regard. The credit taken on the goods not received in the factory has been rightly denied. It the appellants plea is to be accepted it would result in a situation where the factum of payment of duty on the inputs becomes the only important consideration even when Rule 57(G) speaks of inputs received in the factory. Such a construction is not possible. The credit has been rightly denied on the goods not received.
7. The Commissioner confirmed the penalty imposed under Rule 571(4) read with Section 11 AC. A part of the period involved in this case is prior to enactment of Section 11 AC which came into force in Section 11 AC, a composite penalty, is not permissible even in a case larger period of limitation is invoked. The ends of justice are met when the appellant is denied the credit because of non adherence to the provisions of Rule 57G. We accordingly set aside the composite penalty imposed under Rule 571(4) read with Section 11AC Interest under Rule 57I (5) is recoverable
8. The appeal is thus partly allowed. While we confirm the demand for duty as interest we set aside the penalty.
(Operative part pronounced in Court)