2000 (7) TMI 331 - AT - Central Excise

Appellant penalized for Modvat credit fraud, penalty reduced on financial hardship plea

The appellant, found guilty of facilitating fraudulent Modvat credit availing, was penalized Rs. 1.5 lacs under Rule 209A. Despite raising concerns about ... Stay/Dispensation of pre-deposit - Penalty Issues: Imposition of penalty under Rule 209A on the appellant for facilitating Modvat credit fraudulently, dismissal of appeal by Commissioner (Appeals) for default under Section 35F, lack of personal hearing before dismissal, relevance of Rule 209A for penalty imposition, financial hardship plea by the appellant.Imposition of Penalty under Rule 209A:The judgment involves the imposition of a penalty of Rs. 1.5 lacs on the appellant for facilitating fraudulent Modvat credit availing by another party. The appellant, Shri Ashish Gupta, was found to have supplied fictitious gate passes under which no material was actually supplied, enabling the other party to evade duty on finished products. The penalty was imposed under Rule 209A based on allegations that the appellant knowingly allowed the other party to take Modvat credit on duty paying documents that were inadmissible. The judgment clarifies that wrong citation of a rule does not invalidate proceedings if the allegations are otherwise sustainable. The issue of penalty imposition under Rule 209A was thoroughly analyzed, emphasizing the relevance of the rule to the appellant's actions.Dismissal of Appeal by Commissioner (Appeals) for Default under Section 35F:The appellant filed an appeal before the Commissioner (Appeals), who directed him to deposit Rs. 1 lac within 15 days as per Section 35F. However, the appellant represented against the pre-deposit order, but the appeal was dismissed for default under Section 35F. This issue highlights the procedural aspect of pre-deposit requirements under Section 35F for appeals and the consequences of non-compliance leading to dismissal, as observed in the judgment.Lack of Personal Hearing and Relevance of Involvement:The appellant raised concerns about not being given a personal hearing before the dismissal of his appeal. However, the judgment noted that the appellant did not request a personal hearing in his correspondence with the appellate authority. Additionally, the appellant argued that he was not directly involved with the main charged party in the proceedings. Still, it was established through statements and admissions that the appellant was implicated in facilitating the fraudulent activities, thus justifying the penalty imposed on him. The judgment addressed the appellant's contentions regarding personal hearing and his alleged lack of direct involvement in the fraudulent activities.Financial Hardship Plea and Order Modification:The appellant pleaded financial hardship, although no evidence was provided to support this claim. The judgment acknowledged the plea but found the original penalty amount too high. Consequently, the penalty amount was reduced from Rs. 1 lac to Rs. 50,000, with the appellant directed to make this deposit within eight weeks. Upon compliance with the modified order, the balance of the penalty would be waived, and recovery stayed until the appeal's final disposal. The judgment considered the appellant's financial hardship plea and adjusted the penalty amount accordingly.Conclusion:The judgment thoroughly analyzed the issues surrounding the imposition of the penalty under Rule 209A, dismissal of the appeal for default under Section 35F, lack of personal hearing, relevance of the appellant's involvement, and the appellant's financial hardship plea. It provided detailed explanations and legal reasoning for each issue, ensuring a comprehensive understanding of the decision-making process and the considerations taken into account by the tribunal.