1999 (5) TMI 625 - AT - Central Excise

Collusion for wrongful credit leads to penalties, Tribunal rules in favor of appellant

BURROUGHS WELCOME (I) LTD. Versus COMMISSIONER OF C. EX., MUMBAI-III

BURROUGHS WELCOME (I) LTD. Versus COMMISSIONER OF C. EX., MUMBAI-III - 2000 (124) E.L.T. 522 (Tribunal) Issues:1. Allegation of collusion between two divisions of the same company for wrongful Modvat credit availed by the chemical division.2. Dispute regarding the payment of duty and Modvat credit availed by the pharmaceutical division.3. Legal interpretation of exemption notifications and Modvat credit eligibility.4. Validity of invoking a larger period of limitation and the applicability of Section 11AC retrospectively.Analysis:Issue 1:The Commissioner held that collusion existed between the chemical and pharmaceutical divisions of the company to defraud the Government by availing wrong Modvat credit. The chemical division transferred inputs to the pharmaceutical division, leading to the accumulation of Modvat credit. The Commissioner imposed penalties on both divisions for intentional collusion.Issue 2:The dispute arose from the payment of duty and Modvat credit availed by the pharmaceutical division based on inputs received from the chemical division. The Department objected to the Modvat credit taken at a higher rate, alleging that the chemical division paid duty as a deposit, not actual duty. Show cause notices were issued, and the adjudicating authority confirmed the duty demand and penalties.Issue 3:The appellant argued that they had the option to forego exemption benefits and pay duty, allowing them to avail Modvat credit. They cited previous Tribunal decisions supporting their claim that once duty payment is not challenged, Modvat credit cannot be denied. The appellant contended that the Department's invocation of Section 11AC was incorrect as it was introduced after the period in question.Issue 4:The Tribunal found that the adjudicating authority wrongly invoked a larger period of limitation and Section 11AC retrospectively. They emphasized the appellant's right to choose exemption benefits and pay duty, as established in previous Tribunal decisions. The Tribunal set aside the impugned orders, ruling them devoid of merit and substance, and allowed the appeals with consequential relief.In conclusion, the judgment addressed allegations of collusion, disputed duty payments and Modvat credit availed, legal interpretations of exemption notifications and Modvat credit eligibility, and the validity of invoking a larger period of limitation and Section 11AC retrospectively. The Tribunal's decision provided detailed analysis and legal reasoning, ultimately setting aside the impugned orders and allowing the appeals.