[Judgment]. - This appeal is by the Revenue challenging the Legality and correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore in appeal No. 1. E/534/02, 535/02, 2. E/466/02, 467/02, 3. E/811/02 dt. 21st April 2005.
2. The above appeal was preferred by the respondents challenging the order passed toy the Commissioner of Central Excise dt. 30th January 2002 in order No. 1/2002.
3. We have heard the learned counsel for the parties.
4. The facts of the case are as hereunder :
The Commissioner of Central Excise, Bangalore issued a show-cause notice to the respondents on 2-3-2001 stating that the respondent - M/s. Rishi Polymach Private Limited by contravening the provisions of Rules 57A(4) and 57G(3) of the Central Excise Rules, 1944 and by availing Modvat credit on the inputs which were not received and were not utilised in the manufacture of their final products through wilful misstatement and with a Fraudulent intention to evade payment of duty, respondent - Company has availed an ineligible Modvat credit totally amounting to Rs. 31,26,264/-, called upon the respondent to show cause why an action should not be taken in accordance with law. The respondent filed a detailed objection. Thereafter the Commissioner passed an order on 30th January 2002 disallowing the Modvat credit of Rs. 31,26,264/- and ordered to recover the aforesaid amount from out of the current account and also imposed penalty on the respondent. This order was questioned by the respondent Nos. 1 and 2 by filing an appeal before the Tribunal.
5. The Tribunal after hearing the parties came to the conclusion that out of the total amount of Modvat credit disallowed, major portion amounting to Rs. 24,81,895/- relates to non-use of imported materials. The Tribunal also came to the conclusion there is an omission on the part of the respondent in not mentioning the same in the balance sheet and based on the same has disallowed the credit. The Tribunal also came to the conclusion that the respondent after realising its mistake crept in preparation of the balance sheet by the auditors an additional/supplementary balance sheet was filed and therefore it held the disallowance of the above Modvat credit was unsustainable and further held that the imported raw materials had been used by the respondent in the manufacture of HDPE pipes and the Tribunal also came to the conclusion that the appellant herein did not investigate the case properly and further held even if the respondent had used inferior grades and diverted the goods invoiced, the appellant has to prove the same by producing cogent evidence. It further held that the goods supplied by M/s. MCCPL had not reached the appellant-factory and it is for the Revenue to investigate to find out whether the goods have been diverted and further held that when the Revenue holds that the respondent has used inferior grades then it is for the appellant to prove the source of such inferior grades of HDPE granules. Accordingly, the appeal was allowed. Challenging the same, the present appeal is filed by the Revenue.
6. According to the learned counsel for the Revenue, the Tribunal has misdirected itself in placing the burden of proof on the appellant. According to him, when the balance sheet of the respondent did not disclose the receipt of the material and if the balance sheet has been altered subsequently after receipt of the show cause notice, it is for the respondent-company to show how and when the material received by it has been in manufacturing the finished products out of the raw materials received from other countries. According to him, the Tribunal instead of directing the respondent to prove its case has wrongly placed the burden on the appellant and had granted relief erroneously. Therefore, he requested the Court to set aside the order passed by the Tribunal and allow the appeal.
7. Per contra, the learned counsel for the respondents submit that when once the receipt of the material has been accepted, it is for the appellant to prove that the same was not actually utilised in the manufacturing process by the respondents and they request the Court to dismiss the appeal.
8. Having heard the counsel for the parties, the only substantial question arises in this appeal is whether the Tribunal was justified in holding that the appellant has failed to prove that the material had not been utilised by the respondents in order to disallow the Modvat credit and whether the Tribunal was justified in disallowing the Modvat credit as unsustainable solely relying on the supplementary balance sheet.
9. After hearing, we notice that in the balance sheet maintained by the respondent, the receipt of the imported material was not disclosed. Later on a supplementary balance sheet has been issued by the auditors of the respondents for a period of four years, which would show that the balance sheet maintained by the respondent was not proper. The Tribunal without considering the same, mainly relying upon the supplementary balance sheet has allowed the appeal. Whether such a mistake could be crept in continuously for the period of four years in the balance sheet of the respondent-company. This fact has to be explained properly by the respondent.
10. Without assigning any reason, the Tribunal has accepted the supplementary balance sheet, which according to us, the Tribunal has committed a grave error in allowing the appeal by accepting the supplementary balance sheet.
11. When the supplementary balance sheet is relied upon by the respondents, it is for them to show that the goods received were actually received and utilised in manufacturing the finished products. The Tribunal has wrongly placed the burden of proof on the appellant instead of placing it on the respondents. When the respondents contends that based on the supplementary balance sheet that it had received the imported material for the purpose of manufacturing, it is for the respondents to discharge the burden by producing acceptable evidence before the authorities to show how the material was received by them had been utilised for the purpose of manufacturing. When the receipt of the material is accepted by the respondents, it is not for the appellant-revenue to prove how it is not utilised and it is for the respondents-company to prove how the raw material is used by them.
12. In the circumstances, we are of the opinion that the Tribunal without considering the facts of the case properly and without giving any importance to the documents produced by the parties has come to this conclusion. In the circumstances, we are of the opinion that the order of the Tribunal has to be set aside answering the question framed in favour of the appellant herein.
13. The appeal is allowed. The order of the Tribunal dt. 21-4-2005 is hereby set aside and the matter is remanded to the Tribunal for fresh consideration in accordance with law.
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