Commissioner of C. EX., Mumbai-III vs Basant Rubber Factory Ltd.

J.P. Devadhar, J.—This appeal was admitted on 24-1-2006 on the following substantial questions of law :

(a) Whether the Tribunal was justified in law in upholding that the claim of the assessee for availment of Modvat/Cenvat credit on the goods which were never received by the assessee in their factory?

(b) Whether the extended period of limitation for issue of show-cause notice can be invoked when the goods received by the assessee are different than the goods shown in the invoices which would amount to suppression /misdeclaration?

The respondent-assessee is engaged in the manufacture of components of railway coaches and supply the same exclusively to the Railways. Duty paid hot rolled and cold rolled sheets (HR & CR sheets) are the inputs used in the manufacture of the above components and the assessee had taken credit of duty paid on such inputs.

On 11-10-1999, the DRI Authorities visited the factory of the respondent-assessee and found discrepancies in the thickness of the HR & CR sheets claimed to have been purchased and actually found at the premises. Show-cause notice was issued on 9-1-2009 (sic) calling upon the assessee to show-cause as to why the credit of duty amounting to Rs. 26,61,570/- should not be recovered from the assessee and penalty should not be imposed.

By an order-in-original dated 26-6-2002 the assessing officer con-firmed the demand and imposed a penalty of the equivalent amount. On further appeal, the CESTAT by the impugned order dated 18-3-2005 2005 (101) ECC 200 set aside the demand and penalty. Challenging the aforesaid order, the present appeal is filed.

The entire case of the Revenue is based on the fact that there were discrepancies in the thickness of the inputs namely HR & CR sheets found at the factory premises on 11-10-1999. Perusal of the order-in-original shows that the discrepancies in the thickness of the inputs were found on the basis of the details of consignments procured from the registered dealers and the purchase documents with the assessee. The Tribunal has recorded a finding of fact that the duty on the MR & CR sheets are not paid on the basis of the thickness, but the duty is paid on the weight basis and, therefore, the discrepancy in the thickness if any, has no bearing on availing the Cenvat credit. It is neither the case of the Revenue that the quantity of inputs actually found were less than the quantity recorded in the books, nor it is the case of the Revenue that the credit has been taken without actually paying the duty. Therefore, in the facts of the present case, credit of duty paid on inputs could not be denied solely on the ground that mere is dome discrepancy in the thickness of the inputs, especially when the purchase documents did not refer to the thickness of the inputs and the thickness was not the relevant criteria for payment of duty on the inputs in question.

In these circumstances, in our opinion the decision of the Tribunal that the assessing officer was not justified in denying the credit of duty on account of alleged discrepancies in the thickness of HR & CR sheets cannot be faulted. There was neither suppression nor misdeclaration. It cannot be said that the assessee had not received duty paid inputs, credit of which was taken by the assessee. Accordingly, we dispose of the appeal in the aforesaid terms with no order as to costs.