2008 (6) TMI 440 - AT - Central Excise

Modvat credit disallowance upheld due to pre-installation claim, penalties imposed

The tribunal upheld the disallowance of modvat credit and penalties imposed on the appellants due to discrepancies in the installation and commissioning ... Demand and penalty - Cenvat/Modvat Issues:- Import of Maxi Press Machine for manufacturing excisable goods- Disallowance of modvat credit and imposition of penalties- Discrepancy in installation and commissioning dates- Fraudulent conduct in obtaining credit before actual installation- Appeal against the order of disallowance and penaltiesAnalysis:1. The appellants imported a Maxi Press Machine for manufacturing excisable goods and claimed modvat credit. However, discrepancies arose regarding the installation and commissioning dates of the machine. The Departmental Officers found the machine uninstalled in the factory premises, contradicting the appellants' claims of installation and trial production. A chartered engineer's certificate confirmed that the machine may not have been installed or commissioned as claimed by the appellants. The General Manager admitted to providing false information regarding the installation and trial production, leading to the disallowance of modvat credit.2. The Additional Commissioner disallowed the modvat credit amount and imposed penalties under Rule 57U(6) and Rule 173Q(1)(bb). On appeal, the Commissioner (Appeals) upheld the disallowance of credit and the penalty under Rule 57U(6) but set aside the penalty under Rule 173Q(1)(bb). The appellants argued that the machine was installed on a specific date, supported by a certificate from the General Manager. However, the tribunal found discrepancies in the certificates provided by the General Manager, leading to the rejection of the appeal.3. The tribunal noted that the appellants not only claimed credit but also utilized it before the actual installation of the machine. Providing false certificates regarding installation and trial production indicated fraudulent conduct. Consequently, the penalty imposed was deemed justifiable under Rule 57U(6), which mandates the penalty to be equal to the duty evaded. The tribunal upheld the penalty and rejected the appeal against the order of disallowance.4. Regarding the appellants' request for credit restoration post-installation, the tribunal clarified that the lower authorities did not deny this claim. They advised the appellants to address this issue with the Deputy Commissioner for further verification and necessary action. The appellants were granted the opportunity to pursue this matter separately. Ultimately, the tribunal found no errors in the Commissioner's order and dismissed the appeal, upholding the disallowance of modvat credit and penalties.Conclusion:The tribunal's decision affirmed the disallowance of modvat credit and penalties imposed on the appellants due to discrepancies in the installation and commissioning dates of the imported Maxi Press Machine. The fraudulent conduct of claiming credit before actual installation led to the rejection of the appeal. The appellants were advised to seek credit restoration post-installation through the Deputy Commissioner, as per the tribunal's directive.