2004 (1) TMI 453 - AT - Central Excise

Court sets aside penalty under Section 11AC for incorrect credit availment

PR. PRODUCTS Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-II

The appeal challenged the imposition of penalty under Section 11AC for incorrect availment of Modvat credit. The court upheld the duty confirmation but ... Penalty - Shortage of modvatable inputs Issues:Imposition of penalty under Section 11AC questioned in appeal.Analysis:In this appeal, the appellants challenged the imposition of penalty under Section 11AC. The facts were largely undisputed, with a shortage of modvatable inputs found by the Central Excise Officer during a check on 11-12-98. The appellants acknowledged the shortage and reversed the Modvat credit as per the order-in-original. Despite a show cause notice issued on 9-7-99 after the normal limitation period, the appellants had already reversed the credit, which was accepted as payment towards the confirmed duty. The liability to reverse the Modvat credit was not contested, and the appellants did not reserve any right to claim a refund. Therefore, the question of invoking the extended period of limitation for duty demand did not need to be addressed.Regarding the penalty under Section 11AC, it was argued that it could not be imposed as the case did not involve non-payment or short payment of duty by the appellants. Instead, it was a case of incorrect availment of Modvat credit, which could be penalized under Rule 57(1). However, the adjudicating authority did not impose any penalty under that rule. Consequently, the imposition of penalty under Section 11AC was deemed unsustainable. The impugned order confirming the duty by disallowing the Modvat credit was upheld, but the imposition of penalty under Section 11AC was set aside. The appeal was disposed of accordingly.