[Order per : T.K. Jayaraman, Member (T)]. - The following appeals against the Order-in-Original No. 1/2002, dated 4-2-2002 passed by the Commissioner of Central Excise, Bangalore-III are taken up for the disposal.
| S. No. | Appeal No. | Appellant | Respondent | Amount involved | ||||
| 1. | E/534/2002 | M/s. Rishi Polymach Pvt. Ltd. (RPPL) | CCE, Bangalore | Modvat Credit Rs. 31,36,264/- & equal penalty. | ||||
| 2. | E/535/2002 | Mr. Prakash Chand Mehta, MD, RPPL | -do- | Penalty Rs. 3,00,000/- | ||||
| 3. | E/811/2002 | Mr. Anil Kumar Agarwal, RPPL | -do- | Penalty Rs. 30,000/- | ||||
| 4. | E/466/2002 | M/s. Sunrise Freight Movers Ltd. (SFML) | -do- | Penalty Rs. 3,00,000/- | ||||
| 5. | E/467/2002 | Mr. Ramakant Saraf, MD, SFML | -do- | Penalty Rs. 3,00,000/- | ||||
2.In the impugned order the adjudicating authority has disallowed the Modvat credit of Rs. 31,36,264/- availed by the M/s. Rishi Polymach Pvt. Ltd., Mysore (M/s. RPPL for short) under Rule 57-I(1)(ii) of Central Excise Rules, 1944 read with Section 11A(1) of Central Excise Act, 1944. She imposed equal penalty under Rule 57-I(4)/57AH of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944. Interest under Rule 57-I(5)/57AH read with Section 11AB of Central Excise Act, 1944, has been demanded. Penalty of Rs. 3,00,000/- each has been imposed on the following persons under Rule 209A of the Central Excise Rules, 1944 :-
(a) Shri Prakash Chand Mehta, M.D. of M/s. RPPL
(b) M/s. Sunrise Freight Mover Ltd (M/s. SFMPL for short), the authorized Transporter of M/s. RPPL.
(c) Shri Ramakant Saraf, M.D of M/s. SFMPL
Penalty of Rs. 30,000/- has been imposed on Shri Anil Kumar, the in-charge of procurement of raw materials for M/s. RPPL, Mysore under Rule 209A of the Central Excise Rules, 1944. The appellants have strongly challenged the findings of the adjudicating authority.
3.S/Shri K.S. Ravishankar, K.S. Naveen Kumar and H.S. Shivaprasad, learned Advocates appeared for the appellants and Shri L. Narasimha Murthy, learned SDR appeared for the Revenue.
4.The learned Advocates adduced the following arguments :-
(1) The Modvat credit disallowed by the adjudicating authority falls into the following three categories :-
(a) Wrong availment of credit with reference to the application of different grades during the period from 29-4-98 to 20-11-99 - Rs. 4,24,022.00
(b) Wrong availment of Modvat credit from 15-6-2000 to 19-6-2000 and on 28-5-2000 on account of discrepancy between HD 53 EA 010 PA and without PA and E/45A/033 0479050 grades Para 7 of Annexure to Show Cause Notice - Rs. 2,20,347.00
(c) Modvat credit disallowed on account of non-use of imported materials indicated in Balance Sheet - Rs. 24,81,895.00.
Thus total amount of Rs. 31,26,264.00 is disallowed.
(2) The main allegation against the appellants is that they availed Modvat credit on certain inputs which were not actually received in their factory. In fact they used a lesser grade granules than what was shown in the invoices. In connivance with the transporters, the goods dispatched by the suppliers were substituted by the inferior goods. Since the invoiced goods actually did not reach the appellant’s factory, taking of credit on them is irregular. There is also an allegation that the appellants had availed credit wrongly on inputs not recommended for manufacture of HDPE pipes. The appellants purchased raw materials from M/s. Mysore Calcids and Chemicals Ltd. (MCCPL), who are the distributors for the products of M/s. IPCL. The goods used to be transported from Bangalore to the factory with the help of M/s. Sunrise Freight Movers (P) Ltd. (SFMPL) and other transport agencies. In respect of certain invoices, the grade is mentioned as HD 53 EA 010 PA whereas the goods were actually HD 53 EA 010. The Revenue’s contention is that the grade with marking PA is different and the same has been dispatched by the supplier under the relevant invoices. However, the appellants did not receive these inputs as per the invoices but took Modvat credit. The allegations of the Department are based on investigations with the transport agencies, the appellant’s factory, the factory of the supplier. Statements of various persons have been taken.
(3) The learned Advocate contended that the opinion of M/s. IPCL vide their letter dated 4-11-2000 regarding the suitability of certain grades for manufacture of HDPE pipes is not conclusive evidence.
(4) No test was conducted at the appellant’s premises nor the process of manufacture was ever studied.
(5) If the inputs were not fit for manufacture, there is no reason as to why the same should be supplied by M/s. IPCL.
(6) The appellants sent samples of 53180 and other material to Central Institute of Plastic Engineering and Technology, Mysore and their report proves the suitability of the grades for the manufacture of pipes.
(7) There is no positive evidence in favour of the presumption about use of the grades in question in the manufacture of HDPE pipes.
(8) There is no evidence also that the inputs were clandestinely diverted.
(9) There is no material change in the characteristics of the grade HD 53 EA 010 PA and without PA.
(10) Even M/s. IPCL in the product literature did not mention EA 010 PA as a separate commodity and even in their process guide it is mentioned only as 53 EA 010. It is clear that EA 010 is the only material sold for the manufacture of pipes. M/s. IPCL never informed the appellants about any change in EA 010 PA and without PA.
(11) There is no evidence that the appellants had procured 30 MT of said materials from the source other than M/s. IPCL.
(12) There is no hard and fast rule that PA grade should not be used for the manufacture of pipes. The M.D. of the appellant’s Company in his statement has clearly clarified as to how blending could be done with other grades and adhere to ISI specifications. The averment of the M.D. has not been disputed or controverted by any positive evidence.
(13) The statements of drivers/transport agencies did not support the Revenue’s allegations.
(14) As regards the non-use of imported materials, a mistake crept in while preparing the Balance Sheet and the Auditors’ letter prepared the revised balance sheet which has been filed. This fact was intimated to the adjudicating authority. It is well settled position that no duty could be demanded based on solely on balance sheet figures.
(15) The adjudicating authority has failed to appreciate the fact that the granule HD 53 010 PA and HD 53 010 without PA possesses the same characteristics and same application as clearly deposed by Shri Singhal. The minor difference in the price is inconsequential. Hence, the finding of the learned Commissioner that the goods mentioned in the invoices were not received is not correct.
(16) The adjudicating authority failed to appreciate the facts that M/s. IPCL have not at all informed the appellants about the introduction of any new variety from February, 2000. In fact there is no evidence to prove that the appellant has specifically ordered for HD 53 EA 1010 PA.
(17) No investigation at all has been done by the Revenue as to difference in the characteristics of the said goods contained in the bags.
(18) All the drivers and the Manager of M/s. Murugan Road Transport Company had categorically stated that they transported the said goods from CWC to SFMPL. M/s. SFMPL have also clearly stated that they used to transport the goods on request to M/s. RPPL either in their own lorry or hired lorry. In this background if particular driver or transporter has not transported to Mysore, that itself cannot be a ground to hold that the goods were not at all transported to M/s. RPPL, Mysore as erroneously inferred by the adjudicating authority.
(19) The adjudicating authority has presumed that the goods were not transported to Mysore on the ground that M/s. SFMPL did not maintain proper record nor did they endorse on the invoices. Failures if any on the part of the transporters cannot be a ground to hold that the inputs never reached the factory.
(20) No reliance can be placed on the statement of Kum. K. Sheela as she is not concerned in the production. Further, if the statements of Kum. Sheela and Shri Vasuki are read in the context of the fact that even in December 2000, the catalogue issued by M/s. IPCL contained only description of HD 53 010 grade, the same clearly proves that the appellants were receiving the materials as ordered by them based on the catalogue. Hence no adverse inference can be drawn based on the statement of Kum. Sheela and Shri Vasuki.
(21) A mere fact that the transporter obliged the appellants to transport as per their request, by itself, does not amount to abetting/assisting in any irregular availment of credit. The transporter has not any vested interest at all in this regard.
(22) The adjudicating authority has failed to note that if the imported inputs has not been used during the respective years, the production of pipes as recorded in balance sheet would not have been possible.
In view of the above submissions, the order is liable to be set aside.
5.The learned SDR referred to various statements relied on by Revenue and in particular, the statements of Shri Vasuki, Production in-charge of the appellant’s unit and also Kum. K. Sheela, Quality Control in-charge. He reiterated all the points in the adjudication order and urged the Bench to uphold the Order-in-Original.
6.We have gone through the rival contentions. Out of the total amount of Modvat credit disallowed, the major portion to the tune of Rs. 24,81,895/- relates to non-use of imported materials. Since there was an omission in the balance sheet, the adjudicating authority disallowed the Modvat credit. However, considering the fact that the mistake had crept in during the preparation of the balance sheet and the Auditors had issued supplementary balance sheet, the disallowance of the above Modvat credit is not sustainable. Hence we hold that the imported raw materials had been used in the manufacture of HDPE pipes by the appellants. This also is evident from the production figures during the relevant periods. As regards the allegation that the invoiced goods are graded as ‘PA’ and what was available in the factory was inferior grade without PA, we find that the evidence is not very conclusive. The Revenue has not made a detailed investigation as to difference in characteristics between the two grades PA and without PA. Even assuming that the appellants had used inferior grades and diverted the goods invoiced, there should be evidence to prove the same. If the goods supplied by M/s. MCCPL had not reached the appellant’s factory, the Revenue should have investigated to find out where the goods have been diverted. When Revenue holds that the appellants used inferior grades then they should have investigated the source of such inferior grades of HDPE granules. There is no evidence on this crucial point. If the transporter has not maintained proper records regarding the movements of goods, that cannot be a ground for proceeding against the appellants. In our view, the evidence against the appellants is very insufficient to hold that they had taken illegal Modvat credit. It is not disputed that the appellants had actually manufactured HDPE pipes. There is no complaint that the appellants had supplied inferior grades pipes to any customer. The entire case is based on assumptions and presumptions. In these circumstances, the disallowance of Modvat credit for an amount of Rs. 4,24,022/- and Rs. 2,20,347/- cannot be sustained. In view of the above findings, no duty can be demanded from the appellants. As no duty is demanded, the levy of penalty is not at all sustainable. Hence we allow all the appeals with consequential relief.
(Pronounced in the court on 21-4-2005)
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