SUNLAND METAL RECYCLING INDUSTRIES Vs. UNION OF INDIA

JUDGEMENT

(1.) In this writ petition, the petitioners have challenged the show cause notice dated 12.8.2008 calling upon the petitioners why CENVAT credit amounting to Rs.4.82 crores (rounded off) wrongly availed by them should not be recovered with interest and why penalty under rule 13 of the CENVAT Credit Rules, 2002 and under rule 25 of the Central Excise Rules, 2002 and section 11AC of the Central Excise Act, 1944 should not be imposed. The petitioners have also challenged the validity of rule 13(2) of the CENVAT Credit Rules, 2002 (hereinafter referred to as "Rules of 2002") and rule 15(2) of the CENVAT Credit Rules, 2004 (hereinafter referred to as "Rules of 2004") as ultra vires the Central Excise Act, 1944.

(2.) Brief factual background is as follows :

(3.) Petitioner no.1 is a partnership firm and was at the relevant time engaged in manufacturing of zinc, alloy ingots, copper wire bars, etc., In the course of its manufacturing activity, the petitioners cleared goods from time to time and also availed CENVAT credit on the inputs used in such manufacturing activity. The Excise department however, received intelligence that the petitioners were using non duty paid scrap for manufacturing the final product. In order to avail CENVAT credit, they were obtaining duty paid invoices/bills of different inputs and were thus wrongly availing CENVAT credit on the strength of such documents without actual receipt of the inputs against such documents. A search operation was carried out at the premises of the manufacturing unit. As per the department during such search, it was found that there was large scale infraction of rules and availment of CENVAT credit by creating false documents and entries. We are not concerned with the validity of such allegations. Suffice it to record, on the basis of such allegations in the impugned show cause notice, the petitioners were called upon to show cause why :