Ms A.B.Tools vs. Commr.Central Excise

IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA

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Ex. Reference No. 5 of 2002.

Judgment reserved on: 23.9.2008.

Date of Decision: September 24, 2008

M/s A.B.Tools Limited … Petitioner.

Versus

Commissioner of Central Excise. … Respondent.

Coram:

The Hon'ble Mr. Justice Deepak Gupta, J.

The Hon'ble Mr. Justice V.K.Ahuja, Judge.

Whether approved for reporting?

For the Petitioner	:	Mr. M.M.Khanna, Sr. Advocate with<br>Ms. Pushpa Attri, Advocate.
For the Respondent(s)	:	Mr. Sandeep Sharma, Assistant Solicitor<br>General of India.<br>

Deepak Gupta**, J**.

This Excise Reference has been admitted on the following question of law:-

"Whether the applicant being a bonafide purchaser is entitled to Modvat Credit in view of the fact that the gate passes were duly endorsed and the payment is made through Demand Draft?"

The brief facts of the case are that the petitionercompany is engaging in manufacture of M.S. Ingots. It was taking the benefit of MODVAT. During the period June, 1993 to August, 1993, the petitioner-company took the benefit of Rs.44,665/- on the basis of gate passes issued by M/s Vinayak Steel Udyog and M/s Gold Star (P) Ltd. These manufacturers were alleged to have initially consigned the goods to M/s H.P. Enterprises and the gate passes were issued in its name. In turn, M/s H.P. Enterprises consigned the goods in the name of M/s Munish Steel Company and endorsed the gate passes in its name. Thereafter M/s Munish Steel Company endorsed the gate passes in the name of appellant/company. A show cause notice was issued to the appellant/company for denial of benefit of the MODVAT credit and imposition of the penalty on the ground that in fact the original consignors M/s Gold Star (P) Ltd. and M/s Ninayak Steel Udyog were non-existing and bogus companies. The adjudicating authority withdrew the benefit of Rs.44,665/ availed off by the petitioner and imposed penalty of Rs.20,000/-.

In appeal filed by the Company, the CEGAT upheld the decision of the appellate authority in so far as denial of the credit was concerned. However, the penalty was set aside.

While setting aside the penalty, the CEGAT observed that the gate passes were duly endorsed in the name of the dealers and there was no evidence on record to show that the appellant/company connived with the nonexisting manufacturers and issued fictitious gate passes. Therefore, the penalty imposed on the petitioner was set aside.

Relying on the observations, Shri M.M. Khanna, learned senior counsel for the petitioner contends that the MODVAT credit can only be claimed and should not have been denied because as far as the petitioner is concerned, he had not connived with the original consignors i.e. the bogus and fictitious companies.

Even if we accept the contention of Shri M.M. Khanna, the petition is bound to be rejected. The MODVAT credit can only be claimed in respect of the good for which excise duty has already been paid. In the present case, there is no evidence on record to show that the so-called manufacturers had ever deposited any excise duty on the material sent by them to M/s H.P. Enterprises which finally ended up with the petitioner. If duty had not been paid, there was no question of claiming credit under the MODVAT scheme. The companies were fictitious. This is a finding of fact which cannot be set aside in this petition. Gate passes were therefore also fictitious. No benefit of MODVAT on the basis of such fictitious entries could have been claimed by the petitioner.

The excise reference is accordingly rejected.

( Deepak Gupta ),J.

September 24, 2008 ( V.K.Ahuja ),J.

s.