JAGANNATH STEEL (P) LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants availed Modvat credit of duty paid on iron scrap under Rule 57A of the Central Excise Rules. 1944 during the month of May, 1994 amounting to Rs. 25,170/ -. This amount of credit was taken by them for the gate passes issued in the month of March, 1994 to April, 1994, which are endorsed in their name by M/s. P.R. Trading Co., Calcutta. On investigation by the Department, it was found that the gate passes were issued by M/s. Machine and Allied Machinery Corporation, Durgapur and these were endorsed by M/s. P.R. Trading to the appellants. On investigation, it was found that M/s. Machine and Allied Machinery Corporation, Durgapur, is a non -existent entity, therefore, gate passes issued in their name are fictitious and the appellants are, therefore, not entitled for the Modvat credit taken on seven gate passes endorsed by M/s. P.R. Trading Company. Accordingly, show cause notice was issued to them for recovery of the credit and imposition of penalty. The original authority disallowed them the credit of Rs. 25,170/ - and imposed a penalty of equal amount and interest was also demanded on the amount wrongly taken and utilized by them. The appeal filed by them before the Commissioner (Appeals) was rejected under the impugned order.

(2.) IT was pleaded for the appellants that they have taken the credit on the basis of endorsement made by M/s. P.R. Trading Co. M/s. P.R. Trading is a unit in existent and later on, when registration of dealers was provided under the Rules, they had taken registration also. Therefore, the appellants have taken credit on the basis of the documents endorsed by an existing Page 0310 company. They have taken necessary precautions that they are taking the credit on the basis of endorsement made by an existing company. They have made payment for the same to the said company. It was also pleaded that the demand is time barred as they have not committed any fraud by which extended period could have been made applicable for recovery of the credit. Reliance was placed on the decision of the Tribunal in the case of Commissioner of Central Excise v. Sadashiv Casting (P) Ltd. . Finally, it was pleaded that even if it is held that the credit was not available to them on the basic document i.e. gate pass then they are not liable for the penalty as they have not done any act which may lead to imposition of penalty. It was also pleaded that the interest was not chargeable on the amount as the provisions of Section 57 -I was not there at that time.

(3.) ON behalf of the Revenue, it was pleaded that the basic document, i.e. gate pass on the basis of which credit was taken, was issued by a non -existing firm, therefore, the goods could not have come from a non -existing firm and no duty was paid by a non -existing firm. Taking credit on such a document is totally illegal and contrary to the provisions of the Rules. Therefore, penalty is imposable on the appellants for such action. The extended period was also rightly invoked as the appellants had not taken proper precautions that the documents on the basis of which they are taking credit, was issued by a genuine manufacturers, who paid the duty on the iron scrap. Therefore, the appellants are liable to penalty and extended period is also applicable for a fraudulent act of taking credit on fictitious gate passes.