2005 (6) TMI 113 - AT - Central Excise

Court affirms penalty for irregular Modvat credit availment under Rule 57CC, dismissing appeal.

The appeal was dismissed, affirming the demand under Rule 57CC for the recovery of dues related to the removal of exempted computers without duty payment ... Demand and penalty - Cenvat/Modvat on inputs Issues:1. Applicability of Rule 57CC for recovery of dues.2. Imposition of penalty for irregular availment of Modvat credit.Analysis:The case involves the appellants, computer manufacturers, who removed exempted computers to certain customers without payment of duty in March 1998 under Notification No. 10/97-C.E. The department objected to this and sought recovery under Rule 57CC of the Central Excise Rules, 1944. The appeal challenges this demand under Rule 57CC.Upon hearing both sides, it was argued that the demand cannot be enforced due to the absence of a recovery mechanism in the Central Excise law. However, the Departmental Representative (DR) pointed out that there is a recovery mechanism under Rule 57CC as retrospectively amended by the Finance Act, 2005. An 'explanation' was added to Rule 57CC with retrospective effect, covering the period from 1-3-1997 to 31-3-2000, allowing for recovery of dues under the said Rule. Thus, the demand under Rule 57CC for the month of March 1998 was deemed enforceable.The appellant's counsel contended that no penalty should be imposed since there was no statutory recovery mechanism for Rule 57CC dues before the Finance Act, 2005. However, the argument was dismissed as Parliament, by inserting the 'explanation' to Rule 57CC, did not intend to exempt parties from penal liability. The irregular availment of Modvat credit was not disputed, and penal provisions for this were pre-existing, leading to the affirmation of the penalty.Ultimately, the appeal was dismissed, affirming the demand under Rule 57CC and the imposition of the penalty for irregular availment of Modvat credit.