2003 (7) TMI 595 - AT - Central Excise

Appeal partially allowed, penalties set aside for duty payment and credit denial issues.

The appeal was allowed in part, and the penalty imposed on the appellant was set aside for issues related to the valuation of goods for duty payment on ... Demand - Limitation - Cenvat/Modvat - Penalty Issues:1. Valuation of goods for duty payment on parts of brake assemblies.2. Denial of credit and imposition of penalty for obsolete inputs.3. Penalty imposed for credit taken but not utilized.Issue 1 - Valuation of goods for duty payment on parts of brake assemblies:The first issue in the appeal involves the valuation of goods for duty payment on parts of brake assemblies. The appellant paid duty based on the cost of manufacture, but the department demanded duty based on the price at which the goods were sold. The appellant's counsel accepted that duty should have been based on the value of goods sold. The department emphasized the wrong payment of duty but failed to justify why the decision of Essel Packaging Industries should not apply. The Tribunal in Essel Packaging held that there would be no intent to evade duty if lower duty was paid on goods cleared for further assembly in the same factory. Since no exceptional circumstances were alleged, and price lists were provided, the extended period of limitation was not invoked, and the penalty was set aside.Issue 2 - Denial of credit and penalty imposition for obsolete inputs:The second issue pertains to the denial of credit and imposition of a penalty for inputs that were written off as obsolete. The Commissioner denied credit and imposed a penalty based on the argument that the inputs could not have been utilized due to obsolescence. The appellant did not contest the liability to pay the amount taken as credit but argued against the imposition of a penalty under Rule 57. The penalty under sub-rule (1) of Rule 57 would not apply if credit was wrongly taken without intent to evade duty and the subsequent occurrence of rendering the goods obsolete. The penalty was deemed not imposable in this case.Issue 3 - Penalty imposed for credit taken but not utilized:The third issue involves the penalty imposed for credit taken but not utilized, as the goods were accounted for. The departmental representative highlighted that duty was not paid on the goods, and credit was not reversed when it was known that the goods could not be utilized. However, the rules regarding MODVAT at the time used the terms 'taken' and 'utilized' in different contexts. The Tribunal found that in the present case, there was no intention to evade duty at the time of taking credit, and the penalty under sub-rule (4) of Rule 57 was not applicable. Therefore, the penalty imposed on the appellant was set aside.In conclusion, the appeal was allowed in part, and the penalty imposed on the appellant was set aside for both issues related to the valuation of goods for duty payment and the denial of credit for obsolete inputs.