1991 (2) TMI 278 - AT - Central Excise

Appeal allowed, Modvat credit reinstated for soap compounds, personal penalty dismissed.

OSWAL AGRO MILLS LTD. Versus COLLECTOR OF CENTRAL EXCISE

The appeal was allowed by the Tribunal, setting aside the order disallowing Modvat credit on soap compounds and imposing a personal penalty under Rule ... Adjudication - Non-speaking order Issues:1. Disallowance of Modvat credit on soap compounds.2. Imposition of personal penalty under Rule 173Q of the Central Excise Rules, 1944.3. Allegations of passing an ex parte order without considering written submissions.4. Justification of disallowing Modvat credit by the Department.5. Lack of evidence in the Department's case.Analysis:1. The appeal was against the order-in-original regarding the disallowance of Modvat credit on soap compounds by the Additional Collector. The appellants were charged with contravention of Central Excise Rules due to an excess quantity of soap compound found in their store room. The Additional Collector held that the excess quantity was not used as input in soap manufacture and confirmed a demand, along with a personal penalty under Rule 173Q. The appellants argued that the order was based on assumptions and no positive proof was provided that the compounds would not be used as input. The Tribunal found that the compounds were shown as issued for use in soap manufacture and not disposed of, hence allowing the appeal and setting aside the order.2. The issue of imposing a personal penalty under Rule 173Q was raised. The appellants contended that there was no cause or intention to evade duty, and the penalty was unjustified. The Tribunal, after considering arguments from both sides, found that the Department's disallowance of Modvat credit was not justified, and consequently, the imposition of the personal penalty was unwarranted. The appeal was allowed with consequential relief.3. The appellants raised concerns about the Additional Collector passing an ex parte order without considering their written submissions or providing a personal hearing. The Tribunal acknowledged the importance of orders being based on facts rather than assumptions. It was noted that even in ex parte cases, some factual basis is required. The Tribunal found in favor of the appellants, emphasizing the need for due consideration of submissions before passing orders.4. The Department justified the disallowance of Modvat credit, stating that the soap compounds were not used as input in soap manufacture. However, the Tribunal disagreed, highlighting that the compounds were shown as issued for use in soap manufacture and were within the factory premises. The Department's argument was based on assumptions without concrete evidence, leading to the Tribunal overturning the decision.5. The Tribunal noted the lack of evidence in the Department's case, pointing out discrepancies in the Additional Collector's order. The Department failed to provide evidence of clandestine removal or any violation of Central Excise Rules by the appellants. The Tribunal found that the case was built on assumptions and suspicions rather than concrete evidence, leading to the order being set aside and the appeal being accepted.