2002 (9) TMI 482 - AT - Central Excise

Tribunal overturns denial of Modvat credit & penalties, finding lack of evidence.

The Tribunal set aside the Commissioner's denial of Modvat credit on HDPE/LDPE granules and imposition of personal penalties under Rule 173Q. The ... Demand - Limitation Issues:1. Denial of Modvat credit on HDPE/LDPE granules.2. Allegation of replacing prime quality imported granules with lower quality granules.3. Imposition of personal penalty under Rule 173Q.Issue 1: Denial of Modvat credit on HDPE/LDPE granules:The central excise officers found discrepancies during a visit to the appellant's factory, alleging that the appellant replaced duty-paid granules with non-duty-paid ones. The officers issued a show cause notice proposing confiscation of excess goods and denial of Modvat credit worth Rs. 87,217. The Commissioner upheld the denial and imposed a penalty. The appellant argued that the Revenue's case relied on assumptions and lacked concrete evidence. They claimed that the granules in question were processed HDPE granules for manufacturing black HDPE pipes. The Tribunal found no substantial evidence supporting the Revenue's claim and granted the benefit of doubt to the appellant, setting aside the Commissioner's order.Issue 2: Allegation of replacing prime quality imported granules with lower quality granules:Another show cause notice alleged that the appellant replaced prime quality imported granules with lower quality ones after availing Modvat credit, supported by incriminating transport documents. The Commissioner denied Modvat credit worth Rs. 5,64,007 and imposed a personal penalty. The Tribunal noted that the transport documents confirmed the importation of granules to the appellant's factory. The Commissioner's observation that the appellant failed to prove receipt of goods contradicted the transport documents. The Tribunal held that the burden of proof lay with the Revenue, and as no evidence supported the allegation of non-receipt of prime quality granules, the denial of Modvat credit was unjustified. Consequently, the Tribunal set aside the Commissioner's order and ruled in favor of the appellant.Issue 3: Imposition of personal penalty under Rule 173Q:The Commissioner imposed a personal penalty of Rs. 10,000 under Rule 173Q. However, as the Tribunal set aside the denial of Modvat credit and found no substantial evidence supporting the allegations, the imposition of the penalty was unwarranted. The Tribunal's decision to grant relief to the appellant consequently nullified the imposition of the personal penalty.---