LISHA ENGINEERING INDUSTRIES Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE brief facts of the case are as stated below : - The appellants were engaged in steel fabrication of parts of Transformers and Motors under Chapters 84 & 85 of the Schedule to the Central Excise Tariff Act, 1985 and were availing the facility of Modvat credit on inputs under Rule 57A of the Central Excise Rules, 1944 during the relevant period. On 3 -2 -1994, Central Excise Officers, on receipt of intelligence, visited the appellants' factory and inspected statutory as well as private records. They also verified the input gate passes and cross -checked the same with the respective bills/invoices. The scrutiny of records revealed that the appellants had taken Modvat credit of the duty paid on their inputs viz. paints and welding electrodes in RG 23A Part -II during the period April, 1989 to April, 1993 on the strength of gate passes and certificates without accounting for the inputs in RG 23A Part I. The credit of duty so taken amounted to Rs. 1,97,616.45 and the same was utilised for payment of duty on the finished products. The Central Excise Officers also took the statement of the Chief Executive of the factory under Section 14 of the Central Excise Act. On the basis of the said statement and connected enquiries, the Department issued show cause notice to the appellants alleging, inter alia, that they had wilfully suppressed the material fact that the goods covered by the above Modvat credit were actually not received in the factory and used for the manufacture of final products. It was further alleged that the appellants had made fraudulent entries of the quantities of the inputs in their RG 23A Part I register without actually having received the same. The show cause notice, therefore, proposed to disallow the entire credit of Rs. 1,97,616.45 taken by the party on their inputs during the aforesaid period on the ground that such credit was taken on the strength of duty -paying documents received subsequent to the receipt of the inputs, and further proposed to recover the said amount of duty under the provisions of Rule 57 -I of the Central Excise Rules read with the proviso to Section 11A (1) of the Central Excises & Salt Act, 1944. The notice, further, proposed to impose penalty on the party under Rule 173Q(1)(bb) of the Rules ibid for alleged contravention of the provisions of Rules 9(1), 57F and 57G of the Central Excise Rules. The party contested the proposed action of the Department by way of their reply to the show cause notice. The dispute was adjudicated by the jurisdictional Deputy Commissioner of Central Excise who confirmed the entire demand of duty of Rs. 1,97,616.45 and also imposed a penalty of Rs. 20,000/ - on the party. In the appeal filed by the party against this order of adjudication, the Commissioner of Central Excise (Appeals) upheld the order of the Deputy Commissioner in toto. Hence, the present appeal by the aggrieved party.

(2.) I have carefully examined the orders of both the lower authorities and connected records of the case. I have also heard the learned Advocate, Shri O.J. Chacko for the appellants and the learned JDR, Shri D.K. Nayyar for the respondent/Revenue.

(3.) I observe that the adjudicating authority disallowed the credits taken by the party on paints and welding electrodes on the ground that the quantities shown to have been received in the statutory record had not actually been received, which finding was reached by the Deputy Commissioner on the basis of verification of records which showed that the duty -paying documents (endorsed gate passes and certificates) of the inputs (paints and welding electrodes) were not supported by any bills/delivery challans. The party contested this finding of the Deputy Commissioner in their appeal to the Com -missioner (Appeals), by pleading that the quantities of inputs shown in the relevant gate passes have been received in piecemeal on account of their being a small scale industrial unit and that the duty -paying documents were received by them at the time of, or subsequent to, the receipt of the last consignment. This contention of the appellants, I observe, has not been sustained by the lower appellate authority, who found that there was "no correlation with the accounting of the inputs actually received in piecemeal and what has been recorded in the RG 23A Part I register." The lower appellate authority has further found that there are variations in quantities shown in their duty -paying documents with reference to quantities claimed to have been received in piecemeal. The learned Commissioner (Appeals) has further observed thus, "the admission of guilt by the appellants during the course of investigation goes to establish that the findings of the adjudicating authority are correct on this count."