AMIT INDUSTRIES Vs. CCE

JUDGEMENT

(1.) THESE appeals are against the Order No. 24/2002 of the Commissioner of Central Excise, Delhi -I who has disallowed Modvat/Cenvat credit of Rs. 47,53,082 to M/s. Amit Industries (appellants in Appeal No. E/2958/2002 -NB -C) by invoking the extended period of limitation under the first proviso to Sub -section (1) of Section 11A of the Central Excise Act and has imposed a penalty of equal amount on them under the erstwhile Rule 173Q of the Central Excise Rules, 1944 read with Rule 571(4)/57AH of the said Rules and Sections 11AC and 38A of the Central Excise Act 1944 and has, further, imposed a penalty of Rs. 5 lakhs on Shri Suresh Kumar Agarwal (appellant in Appeal No. E/2959/2002 -NB -C) under Rule 209A of the said Rules read with Section 38A of the Central Excise Act, 1944.

(2.) M /s. Amit Industries were engaged in the manufacture of electrical stampings and laminations falling under CH 83.12 of the CET Schedule and were availing Modvat/Cenvat credit facility in respect of inputs used in the manufacture of the said products. From the results of investigation made into the process of manufacture undertaken by them, it appeared to the department that the party was showing an abnormally high percentage of scrap generation in their manufacturing process. Scrap was generated at three stages viz. (a) sorting stage (at which unusable material was sorted out of imported scrap), (b) slitting stage (at which scrap was generated in the form of thin side -cuttings) and (c) cutting/punching stage. It appeared to the department that the scrap generation at the slitting and cutting stages was very negligible (not more than 5% of the total quantity of raw materials used) and that the maximum generation of scrap was at the sorting stage. The department did not consider the sorting stage as a part of the process of manufacture of final products and, therefore, they held the view that the material rejected at the sorting stage was not eligible input as it could not be said to have been used "in or in relation to the manufacturing process". Accordingly, by show -cause notice dated 22.6.2001, the department proposed to recover from the party the duty equivalent to the Modvat/Cenvat credit taken by them for the period from 1.4.96 to 31.3.2000 in respect of the materials rejected at the sorting stage. Obviously, the demand was for a period beyond the normal period of one year prescribed under Section 11A(1) of the Act. The show -cause notice invoked the extended period of limitation under the first proviso to the said sub -rule by alleging "suppression of facts and contravention of Modvat/Convat Rules with intent to misutilise the credit". The show -cause notice also proposed to penalize Suresh Agarwal (proprietor of Amit Industries) under Rule 209A by alleging that he had aided and abetted the offence committed by M/s. Amit Industries. The allegations were denied and the demand of duty contested. The Commissioner, who adjudicated the show -cause notice, passed the impugned order.

(3.) HEARD both the sides.