2002 (2) TMI 200 - AT - Central Excise

CEGAT Rules on Recovery Orders and Penalties Deemed Impermissible by Mumbai Bench

The appellants were accused of contravening Central Excise Rules by using inputs in exempted final products without adjusting duty credits, leading to ... Cenvat/Modvat - Exempted final product Issues:1. Alleged contravention of provisions of Rules 57C, 57CC, 57G, 173H, and 173G of the Central Excise Rules, 1944.2. Recovery of amount @ 8% of the price of cokes sold without payment of duty under Rule 57CC.3. Penalty imposition under Rule 57-I(4) for irregular availment of credits on inputs.4. Legal position on recovery of amount @ 8% of the value of goods cleared without payment.5. Interpretation of relevant legal provisions and circulars in relation to recovery of credits.Issue 1:The appellants were alleged to have contravened various provisions of the Central Excise Rules by utilizing inputs in the manufacture of exempted final products without following the prescribed procedures. The show cause notice accused them of not adjusting the specified duty credit on inputs used in the manufacture of products with no excise duty payable, contravening Rules 57C and 57CC.Issue 2:The Commissioner ordered the recovery of an amount calculated at 8% of the price of cokes sold without duty payment under Rule 57CC. The appellants were held liable for this recovery, along with a penalty under Rule 57-I(4) for irregular credit availment on inputs used in manufacturing the cokes dispatched without duty payment.Issue 3:The penalty was imposed on the appellants for deliberate suppression of material facts and irregular credit availment, as determined by the Commissioner under Rule 57-I(4). This penalty was confirmed along with the recovery of the specified amount under Rule 57CC(1) read with Rule 57-I(1).Issue 4:The legal position on the recovery of the amount at 8% of the value of goods cleared without payment was discussed in a judgment by the Mumbai Bench of CEGAT. It was held that without specific recovery provisions in the Act or Rules, such amounts could not be claimed from the assessee. This position was supported by a Board Circular, indicating that recovery of such credits taken incorrectly is covered by Rule 12 (erstwhile Rule 57-I).Issue 5:Given the legal interpretation and precedent set by the Mumbai Bench of CEGAT and the Board Circular, the recovery of the specified amount at 8% and the penalty imposed were deemed not sustainable. The impugned order was set aside, allowing the appeal. The respondents were advised to pursue recovery of corresponding Modvat credit availed on inputs used in the manufacture of exempted final products in accordance with the law.