Tribunal denies appeal for Modvat credit, upholds penalty under Rule 173Q(1)(bb) without mens rea.

WILLARD INDIA LTD. Versus COLLECTOR OF CENTRAL EXCISE, MEERUT

WILLARD INDIA LTD. Versus COLLECTOR OF CENTRAL EXCISE, MEERUT - 1997 (92) E.L.T. 578 (Tribunal) Issues Involved:
1. Entitlement to differential Modvat credit.
2. Applicability of limitation period for issuing a show cause notice.
3. Justification for the imposition of penalty.

Issue-wise Detailed Analysis:

1. Entitlement to Differential Modvat Credit:
The appellants, manufacturers of Lead Acid Electric Storage Batteries, claimed additional Modvat credit on lead inputs based on a revised deemed credit order. Initially, they took credit at Rs. 975/- per Metric Tonne as per the order dated 1-8-1989. Following a new order on 12-7-1990, which increased the credit rate to Rs. 2100/- per Metric Tonne, they claimed the differential credit for the unutilized stock. The department contended that since the appellants had already availed credit at the lower rate, they were not entitled to the differential credit. The Tribunal held that the deemed credit order under Rule 57G(2) of the Central Excise Rules did not allow for additional credit if credit had already been availed. The term "specified duty" used in both orders referred to the same duty, and thus, the appellants' claim of taking deemed credit earlier did not exempt them from the restriction. The Tribunal rejected the appellants' plea, stating that the new rate applied only to inputs received on or after the date of the revised order.

2. Applicability of Limitation Period for Issuing a Show Cause Notice:
The appellants argued that the show cause notice issued on 31-5-1991 was beyond the six-month limitation period from the date of taking the disputed credit on 11-11-1990. The department countered that the limitation period should start from the filing of the monthly return in December 1990. The Tribunal noted that prior to the amendment on 16-3-1995, the limitation period was six months from the date of taking credit. However, the Tribunal referred to precedents where communications from the department, although not formally show cause notices, were treated as such. The Tribunal concluded that the Superintendent's letter dated 13-11-1990, which disallowed the credit, could be construed as a show cause notice, thereby making the notice within the limitation period.

3. Justification for the Imposition of Penalty:
The appellants were penalized for taking inadmissible Modvat credit and not maintaining proper records. The Tribunal found their conduct blameworthy, as they took the disputed credit four months after the revised rate came into effect, making verification difficult. The Tribunal referred to Rule 173Q(1)(bb) of the Central Excise Rules, which provides for penalty on wrongful credit of duty. Citing the Supreme Court's observation in Gujarat Travancore Agency v. Commissioner of Income Tax, the Tribunal emphasized that mens rea was not required for imposing a penalty under civil obligations. The appellants' actions fell within the ambit of Rule 173Q(1)(bb), justifying the penalty imposed by the adjudicating authority. The appeal was dismissed, upholding the penalty.

Conclusion:
The Tribunal dismissed the appeal, rejecting the appellants' claims on merits, limitation, and penalty. The decision emphasized adherence to the provisions of the Central Excise Rules and upheld the department's actions in disallowing the differential Modvat credit and imposing penalties for non-compliance.