1996 (3) TMI 290 - AT - Central Excise

Appellant's Duty Credit Dispute: Procedural Compliance Key in Overturning Penalty

The appellant received back consignments and took credit on duty paid, which was disputed by the department. The Assistant Collector ruled against the ... Modvat on inputs Issues:1. Entitlement to credit on duty paid on consignment received back.2. Recovery of credit used towards payment of duty on other consignments.3. Imposition of penalty for lapse by the assessee.4. Procedural error and duty payment on goods.Analysis:1. The appellant received back consignments of pine tar and rosin oil compound from buyers due to various reasons. The appellant took credit of the duty paid on these consignments, which was objected to by the department. The Assistant Collector held that the appellant was not entitled to this credit and demanded duty equal to the credit taken. However, he acknowledged that once the credit was reversed, there was no basis for demanding duty again on goods cleared using this credit. A penalty of Rs. 4,000 was imposed for the lapse by the assessee.2. The Collector (Appeals) found that the issue was a procedural error by the appellant and allowed the appeal, setting aside the Assistant Collector's order. The department appealed this decision, arguing that the credit was wrongly taken, and duty was paid a second time, even though there was no loss to the department. The advocate for the respondent contended that the department was informed about the receipt of goods and that the action was covered by relevant provisions.3. The goods in question were not declared as inputs by the appellant, nor were they used as such. The pine tar was cleared as is, while the rosin oil compound underwent some form of reprocessing. The Tribunal referred to a previous decision involving a similar issue and concluded that the goods did not qualify as inputs for credit purposes. The Tribunal emphasized that even if there was no revenue loss in this case, procedural contraventions cannot be condoned.4. The Tribunal accepted that the appellant did not have any intention to evade duty or default revenue, as evidenced by timely filing of D3 intimation. Therefore, the imposition of a penalty was deemed unwarranted. The appeal was partially allowed, setting aside the Collector (Appeals) order and reinstating the Assistant Collector's decision. The penalty imposed was also set aside.