COMMISSIONER OF CENTRAL EXCISE Vs. LORD BALAJI ENTERPRISES

JUDGEMENT

(1.) THE subject appeal had been filed by the department against Order -in -Appeal No. 362/2004 -CE dated 30.09,2004 passed the Commissioner of Central Excise (Appeals), Salem. In the Order -in -Appeal, ld. Commissioner has dropped the proceedings proposed in the show -cause notice against M/s Lord Balaji Enterprises. The case against the assessee was that in the year 1999, they had availed credit of duty paid on 'Bright Bars' to the tune of Rs. 22,769/ - on the strength of fake invoices issued by M/s Jaiswal Engg. Work (P) Ltd., Jamshedpur. The original authority had confirmed the demand of duty and ordered recovery of the wrongly availed Modvat credit of Rs. 22,769/ - under Section 57I invoking the larger period. He had demanded interest under Section 11 AB read with Section 38A of the Central Excise Act, 1944 and imposed penalty equal to the duty demanded in terms of Rule 57I of the Central Excise Rules, 1944. On appeal to the Commissioner (Appeals), he observed that the party had paid the duty due as per the invoices, under cover of which the assessee had obtained the inputs. The assessee had furnished the concerned invoices for defacement and they were duly defaced by the jurisdictional Range Superintendent. Long later in the month of Aug. 03, pursuant to investigations conduced at the supplier's end and on finding that the manufacturer of 'Bright Bars', had sent 'Bright Bars' to the assessee under fake invoices, a show -cause notice was issued invoking the larger period, to demand the duty, interest and to impose penalty. In the adjudication proceedings, the Commissioner found that the assessee had not committed any fraud in availing the credit. He also found out that the supplier had approached the Settlement Commission and had paid an amount of Rs. 35 lakhs (approximately) towards the duty liability on goods manufactured and cleared by him. Me was satisfied that the assessee had paid the duty due and had in no way colluded with the supplier in evading payment of duty. He relied on the ratio of the decision of the Eastern Bench of the Tribunal in IDL Chemicals Ltd, v. Commissioner of Central Excise, Bhubaneshwar and dropped the proceedings against the assessee. The IDL Chemical's case dealt with an identical case, where the assessee had paid duty on the inputs received against fake invoices, for recovering which a show -cause notice was issued invoking the larger period. The Tribunal had observed that the assessee had not made any mis -statement, or suppression of facts and larger period of limitation had been wrongly invoked.

(2.) ARGUING the case of the department, ld. SDR stated that the assessee had availed credit against invalid documents and that duty had been correctly demanded. The fraud was found out only on investigation by the department and, therefore, the show -cause notice had rightly invoked the larger period. She pleaded that the order of the original authority has to be restored.

(3.) ARGUING for the respondents ld. Adv. Shri J. Sankararaman pleaded that it is a case, where the assessce had paid the duty and received inputs under cover of invoices. The assessee bonafidely believed that the document under which the goods had been received from a big manufacturer was genuine and so availed the credit. The assessee produced the invoices on which credit was taken for verification and defacement by the Range Superintendent somewhere in 1999. Much later in 2003, a show -cause notice was issued alleging willful suppression, collusion etc., which was not justified. The supplier had committed a big fraud and the Commissioner (Appeals) himself had noted a liability of over Rs. 60 lakhs. Out of this, the supplier -manufacturer paid Rs. 35 lakhs for settling the case before the Settlement Commission, Principal Bench, New Delhi. He cited a few case laws to support the claim that the show -cause notice was time barred. He also cited the case law of IDL Chemicals Ltd, (supra), which dealt with an identical case.