Excise penalty and interest sustained where removal of inputs without credit reversal was treated as evasion under the notice.

The note explains that where a show-cause notice alleges contravention of excise and credit rules, non-payment of correct duty at removal, and intent to evade, an adjudication confirming duty, interest and penalty is treated as within the notice's scope. It further states that the requirements for penalty under Section 11AC and interest under Section 11AB are treated as satisfied when the allegations of evasion are not rebutted. Prior reversal of Modvat credit before notice does not, by itself, defeat the penalty consequence. The reported result was rejection of the assessee's challenge and sustainment of the duty demand and penal liability.

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Issues: Whether the confirmation of duty demand, recovery of interest and imposition of penalty were sustainable where the inputs were removed without reversing Modvat credit or following the prescribed procedure, and whether the adjudication travelled beyond the scope of the show-cause notice.

Analysis: The show-cause notice specifically alleged contravention of the prescribed excise and credit rules, failure to determine and pay the correct duty at the time of removal, and removal of goods with intent to evade duty. It also proposed penalty under the relevant rules read with Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed the duty and appropriated the amount towards the demand. That determination was held to be within the scope of the notice. Since the allegations of contravention with intent to evade were not successfully rebutted, the requirements for penalty under Section 11AC and interest under Section 11AB were treated as satisfied. Reversal of credit before issuance of the notice did not by itself negate penalty.

Conclusion: The demand of duty, interest and penalty was upheld and the challenge based on lack of prior duty determination and prior reversal of credit failed, against the assessee.

Final Conclusion: The appeal was rejected on merits, and the departmental demand and penal consequences were sustained.

Ratio Decidendi: Where the show-cause notice itself alleges contravention, non-payment of duty and intent to evade, a subsequent adjudication confirming duty and imposing interest and penalty does not travel beyond the notice, and prior reversal of credit does not by itself bar penalty under Section 11AC.

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