2004 (10) TMI 486 - AT - Central Excise

Tribunal Upheld Penalty for Wrongful Modvat Credit Claim Despite Appellant's Arguments

LARSEN & TOUBRO LTD. Versus COMMISSIONER OF CUS. & C. EX., AURANGABAD

LARSEN & TOUBRO LTD. Versus COMMISSIONER OF CUS. & C. EX., AURANGABAD - 2005 (181) E.L.T. 216 (Tri. - Mumbai) Issues:Recovery of Modvat credit availed on capital goods, imposition of penalty, interest charges, wilful suppression of information, mis-statement of facts, intention to evade duty, reduction of penalty amount, declaration by the appellant, reversal of Modvat credit, applicability of Section 11AC, interpretation of Rule 57U(6) of Central Excise Rules, reliance on legal precedents, plea for remittance of penalty, justification for penalty imposition.Analysis:1. Recovery of Modvat Credit:The appellant availed Modvat credit on capital goods falling under specific chapters and utilized it for payment of Central Excise Duty. However, a show cause notice was issued for recovery of the amount as the appellant claimed depreciation under the Income Tax Act, contrary to the declaration made under Rule 57T. The department contended that the appellant acknowledged not claiming such Modvat credit, leading to the demand for recovery.2. Imposition of Penalty and Interest Charges:The lower authority confirmed the demand, penalty, and interest charges, which were subsequently reduced by the Commissioner in appeal. The penalty amount was reduced to 25% of the duty involved, considering the provisions of Section 11AC and Rule 57U(6) of Central Excise Rules. The interest amount was confirmed from the date of availing the irregular Modvat credit until its reversal.3. Wilful Suppression and Mis-Statement of Facts:The appellant argued before the Commissioner that even if there was wilful suppression and mis-statement of facts, the penalty should be reduced as per Section 11AC. The Commissioner acknowledged this argument but held that the appellant's actions led to misstatement of material facts, resulting in the illegal claim of tax benefits. The subsequent reversal of Modvat credit did not absolve the appellant from penal liability.4. Declaration by the Appellant and Reversal of Modvat Credit:The appellant's declaration that they would not claim depreciation under the Income Tax Act was considered crucial in determining the intention to evade duty. Despite this declaration, the appellant claimed depreciation, leading to the penalty imposition. The appellant's reliance on legal precedents for remittance of penalty was dismissed as the facts of the current case differed.5. Applicability of Section 11AC and Rule 57U(6):The Commissioner and the Tribunal found that the appellant's case fell under the purview of Section 11AC, allowing for a reduction in penalty to 25% of the duty evaded. The appellant's argument against penalty imposition was rejected, emphasizing the applicability of the legal provisions and the Commissioner's decision to reduce the penalty amount.6. Justification for Penalty Imposition:The Tribunal upheld the Commissioner's decision to impose a penalty, citing the appellant's declaration, failure to reverse the credit despite being informed by the Central Excise authorities, and the specific circumstances of the case. The Tribunal found no grounds to further reduce or remit the penalty, ultimately rejecting the appeal.This detailed analysis of the judgment highlights the key issues, legal interpretations, and the reasoning behind the decision regarding the recovery of Modvat credit, imposition of penalty, and other relevant aspects of the case.