R.S. INDUSTRIES, PAPER Vs. CCE

JUDGEMENT

(1.) IN these 12 appeals, arising out of a common Order -in -Original No. 41/2001 dated 30.10.2001 passed by the Commissioner, Central Excise, Delhi -I, the common issue involved is whether the Modvat Credit is to be disallowed to all the appellants on the ground that the supplier of the inputs has taken the Modvat Credit on fake and bogus invoices and utilized the said Credit towards payment of duty in respect of inputs supplied to the appellants.

(2.) WE heard Shri Naveen Mullick, Shri Kamaljeet Singh, and Shri V.K. Gupta, learned Advocates who appeared on behalf of different appellants. Shri Naveen Mullick, learned Advocate, submitted that the appellants availed of Modvat Credit of the duty paid on the inputs received from the suppliers; that one of the suppliers of inputs is M/s. Prerna Metal Industries; that the inquiries initiated against the said Prerna Metal Industry revealed that they had taken the Modvat Credit on the strength of the invoices which were fake and bogus and were never issued to M/s. Prerna Metal Industry by any of the firms whose name were mentioned in the invoices; that the Commissioner under the impugned Order has disallowed the Modvat Credit amounting to Rs. 46,78,462 to M/s. Prerna Metal Industry and ordered to recover the amount of Rs. 43,99,947 passed as illegal Central Excise duty to various buyers besides imposing penalty on Prerna Metal Inds.; that the Commissioner has also disallowed the Modvat Credit availed by all the appellants on the basis of invoices issued by Prerna Metal Inds. on the ground that as the Credit was wrongly availed of by Prerna Metal Industries, the goods cleared by them to the appellants have to be treated as cleared without payment of appropriate duty; that, however, the Commissioner has not imposed any penalty on the appellants. The learned Advocate, further, submitted that the allegation, contained against the appellants, in para 24 of the show cause notice dated 24.7.2000, was that the appellants had received only invoices which did not cover any goods; that, however, the said allegation has been dropped by the Commissioner in the impugned Order holding that "the show cause notice has been failed to establish beyond doubt that the parties who had availed of Modvat Credit on the basis of invoices issued by Prerna Metal have not received any material against the said invoices. It has been vaguely alleged that no material has been supplied by Prerna Metal to these buyers. In para 10 of the show cause notice it has been stated that Prerna Metal had brought material from Delhi Aluminium Corporation and had made payment to them. The payments are of substantial nature. It has not been clear from the show cause notice to whom the final product manufactured out of this material has been supplied or there was no material purchase at all. In view of the above it is evident that the buyers who had purchased material from Prerna Metal might have received the goods along with the statutory invoices of course without payment of duty."

(3.) SHRI Naveen Mullick, learned Advocate, also mentioned that the Commissioner has given specific finding that no evidence has been brought on record to suggest active involvement of the appellants in the fraud committed by Prerna Metal Inds.; that in view of this finding the Commissioner has not imposed any penalty on any of the Appellants who had purchased from Prerna Metal and have availed Modvat Credit; that in view of this specific finding of the Commissioner the Modvat Credit availed of by them cannot be disallowed and the recovery of the same cannot be ordered; that moreover the inputs were received by them under the cover of invoices containing duty particulars. The inputs are liable to duty and if any fraud had been played by the supplier of the inputs, the Modvat Credit cannot be denied to them; that further, the department had confirmed the demand of duty in respect of goods received by them against Prerna Metal Inds. He finally mentioned that extended period of limitation cannot be invoked in view of the specific finding of the Commissioner of no evidence such as active involvement of the appellants. He relied upon the decision in the case of CCE v. H.M.M. Ltd. 1995 (76) ELT 497 (SC) and Arsh Casting P. Ltd. v. CCE, Chandigarh, 1996 (81) ELT 276 (T). Shri Kamaljeet Singh and Shri V.K. Gupta also made the similar submissions in respect of appellants represented by them.