2002 (9) TMI 194 - AT - Central Excise

Appeal Success: Modvat Credit Penalty Overturned, Rule 173Q Penalty Reduced

The appeal was filed against the recovery of Modvat credit, penalty imposition under Section 11AC, and interest demand. The Tribunal found that the ... Penalty Issues:Appeal against impugned order confirming recovery of Modvat credit under Rule 57-I, imposition of penalty under Section 11AC, and demand of interest during disputed period from June 1999 to December 1999.Analysis:The appeal was filed against the impugned order confirming the recovery of Modvat credit and imposing a penalty under Section 11AC and demanding interest. The appellants did not contest the disallowance of Modvat credit under Rule 57-I. The counsel challenged the legality of penalty imposition under Section 11AC and interest demand under Section 11AB, arguing that Modvat credit cannot be considered as duty. The penalty under Rule 173Q or Rule 57-I(4) was suggested but not invoked in the show cause notice. The DR supported the impugned order.The Tribunal observed that the appellants wrongly availed Modvat credit during the disputed period, which was disallowed by the Commissioner. However, this wrongful availment did not amount to non-payment, short payment, or short levy of duty, necessary for invoking Sections 11AC and 11AB for penalty and interest. Consequently, those sections could not be applied to impose penalty equal to the Modvat credit amount. The penalty under Rule 57-I(4) was not invoked in the notice, so it couldn't be imposed. However, penalty under Rule 173Q was justified and maintained at Rs. 1 lakh due to the appellants' reversal of the credit before the impugned order.In conclusion, the impugned order was modified, setting aside the penalty under Section 11AC and reducing the penalty under Rule 173Q to Rs. 1 lakh. The appeal was disposed of accordingly.