BIKANER WOOLTEX Vs. COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH

JUDGEMENT

(1.) THE proceedings were initiated against the appellants on the ground that they are registered dealers under Rule 57GG of the Central Excise Rules, 1944 in terms of which they can further pass on the modvat credit on the goods received by them from the manufacturers. For this purpose, they had their registered premises at the rented godown of M/s. Sokhi Machinery Manufacturing, Ram Talai, G.T. Road, Amritsar. On investigation by the department, it was learnt that with effect from 1.7.96 onwards the said premises were taken back by the owner on account of non -payment of rent. A statement was recorded from Shri Raj Jain, partner of the appellants on 31.12.98 in which he admitted that they had been issuing modvatable invoices from 1.7.96 onwards without actually receiving the excisable goods as they were not having any registered godown. Accordingly, the proceedings were initiated against the appellants and the Deputy Commissioner of Central Excise, Amritsar vide his order dated 31.8.99 held that all the invoices issued by them during the period from 1.7.96 to 31.12.98 were ab -initio invalid as they were issued to the buyers without having a registered godown for storage of the excisable goods for which the modvatable invoices were issued. He, further, observed in his order that they were effecting the sale in transit and thus the invoices issued by them were not proper for further passing on the modvat credit to end user. Accordingly, the Deputy Commissioner ordered for the recovery of Rs. 25,13,825/ - under Rule 57I of the Central Excise Rules, 1944 from the party. He further imposed a penalty of Rs. 2.50 lakhs on them under Rule 173Q of Central Excise Rules, 1944.

(2.) THE party filed an appeal and the Commissioner (Appeals) vide his order dated 1.9.2000 observed that under Rule 57I, the recovery of wrongly availed modvat credit could be made either from the 'assessee' or the 'manufacturer'. He observed that the terms 'assessee' and 'manufacturer' have been defined under Clause (f) of Section 2 of the Central Excise Act, 1944 and Rule 2(ib) of Central Excise Rules, 1944 respectively. These terms do not include 'registered dealer'. It is observed that there is no provision under Rule 57I to order recovery of wrongly availed modvat credit from a dealer registered under Rule 57GG. Accordingly, the lower appellate authority set aside that part of the Order - in -Original in which the recovery of modvat credit had been ordered from the appellants. As regards imposition of penalty, however, he observed that the party had got their premises (godown) registered for issue of modvatable invoices under Rule 57GG. He observed that as per Sub -rule (4) of Rule 174 of the Central Excise Rules, 1944, every registration certificate is valid only for the premises specified in such certificate. Subsequent to the surrender of or parting with the registered premises from their possession, the appellants ceased to be a registered dealer even though they might not have formally surrendered their registration which in any case was no longer valid in terms of the provisions of Sub -rule (4) of Rule 174. He observed that the premises from where the appellants were allegedly running their business were not registered with the Central Excise Department and since the modvatable invoices issued to the appellants relate to the period when they were not having any registered premises, as such the registration of the appellants was no longer valid. He, accordingly, held that modvatable invoices issued by the dealer subsequent to the surrender of the registered premises were contrary to the provisions of Law which they were liable for penal action. Accordingly, he held that there was no justification to interfere with that part of the order -in -original under which a penalty of Rs. 2.50 lakhs was imposed. The present appeal is against the impugned order of the Commissioner (Appeals). I have heard Shri K.K. Anand, Advocate for the appellants and Shri V.K. Verma, JDR. I have considered the submissions made before me. The facts of the case are already stated above. These in nutshell are that the appellants are a registered dealer of the excisable goods holding central excise registration under Rule 57GG. They had a godown which was registered with the Central Excise department. The godown was surrendered to its owner, however, they continued to receive the modvatable goods and passed on the modvat credit to the buyers under their invoices. The case of the department is that since they were not having proper premises they could not be considered a dealer under Rule 57GG. Therefore, during the period from 1.7.96 to 31.12.98, the modvat credit amounting to Rs. 25,13,825/ - availed by the buyers on the strength of invoices issued by the appellants was not permissible and accordingly the recovery of this amount is ordered by the Deputy Commissioner of Central Excise in his order apart from imposition of a penalty of Rs. 2.50 lakhs on them. The Commissioner (Appeals), however, in his order has set aside the amount of duty/credit ordered to be recovered from the party by the original authority on the ground that there is no provision under Rule 57I to recover the modvat credit from a registered dealer. He has, however, sustained the penalty of Rs. 2.50 lakhs imposed on the party. The part of the order of the Commissioner (Appeals) in which the recovery of amount of Rs. 25,13,825/ - from the appellants is set aside by the Commissioner (Appeals) is not contested by the Revenue. It is observed that the original authority had imposed a penalty of Rs. 2.50 lakhs on the appellants under Rule 173Q which is upheld by the Commissioner (Appeals). However, neither the original authority nor the Commissioner (Appeals) have referred to the particular part of Rule 173Q under which the penalty imposed on the appellants is liable to be sustained. On specific query, the ld. JDR for the department referred to the provisions of Rule 173Q(1)(bbb). These are as follows: -

(3.) AS can be seen form the above provisions, a wilful wrong or incorrect entry in the invoice by a registered dealer with the intention to facilitate the buyer to avail the credit in respect of the modvatable goods which otherwise is not permissible under the rules is a condition precedent for taking penal action against the dealer. Since in this case, there is neither an allegation nor a finding in the order passed by the lower authority of wilful or intentional act to facilitate the buyer to avail the credit which is otherwise not permissible, appellants cannot be subject to a penalty under the rule, specially so when the amount of duty imposed on them itself is set aside by the lower appellate authority and the department does not feel aggrieved with that part of the order. In this view of the matter, no penalty can be imposed on the appellants. The same is, accordingly, set aside and appeal is allowed.