2003 (3) TMI 629 - AT - Central Excise

Appellate tribunal overturns penalty for Modvat credit disallowance due to voluntary reversal before notice.

The appellate tribunal allowed the appeal, vacating the penalty imposed for disallowing Modvat credit as the credit was voluntarily reversed before the ... Modvat credit - inadmissibility for non-receipt of inputs under Rule 57A - voluntary reversal of credit before issuance of show cause notice - penalty for irregular availment of Modvat credit under Rule 57-I(4) read with Rule 173Q - precedent effect of voluntary payment/reversal barring penaltyModvat credit - voluntary reversal of credit before issuance of show cause notice - penalty for irregular availment of Modvat credit under Rule 57-I(4) read with Rule 173Q - precedent effect of voluntary payment/reversal barring penalty - Whether penalty under Rule 57-I(4) read with Rule 173Q is leviable where Modvat credit, admittedly not admissible because inputs were not received, was voluntarily reversed before issuance of the show cause notice. - HELD THAT: - The Tribunal recorded that the Modvat credit in question was not admissible since the inputs had not been received in the factory as required by Rule 57A, and that the appellants had reversed the entire credit prior to the issue of the show cause notice. Applying the principle in the cited Tribunal decision that voluntary payment or reversal of the duty/credit before issuance of show cause notice precludes imposition of penalty under the relevant provision, the Tribunal held that penal liability could not be sustained. The absence of mens rea was noted by counsel but the Tribunal's conclusion rested on the constructive concession of irregularity coupled with the voluntary reversal, and on following the precedent that a pre-notice reversal/paying up removes the basis for penalty. [Paras 4]Penalty imposed under Rule 57-I(4) read with Rule 173Q vacated insofar as it relates to the voluntarily reversed Modvat credit.Final Conclusion: The appeal is allowed insofar as the imposition of penalty is concerned; the penalty relating to the voluntarily reversed Modvat credit is vacated. The appellate tribunal allowed the appeal regarding the penalty imposed for disallowing Modvat credit as the credit was voluntarily reversed before the show cause notice was issued. The penalty was vacated based on the voluntary reversal of the credit.