2000 (11) TMI 527 - AT - Central Excise

Appeal allowed due to technical breach; penalty deemed unlawful in credit availment cases

The Tribunal allowed the appeal, holding that the imposition of a penalty for wrongful availment of credit, despite being upheld due to limitation not ... Wrongful availment of MODVAT credit - limitation bar to recovery of duty - imposition of penalty under Rule 173Q(bb) of the Central Excise Rules - penalty not to be imposed where demand of duty is dropped or barred - precedential binding of Tribunal decision in Cornerstone BrandsWrongful availment of MODVAT credit - limitation bar to recovery of duty - imposition of penalty under Rule 173Q(bb) of the Central Excise Rules - penalty not to be imposed where demand of duty is dropped or barred - Whether penalty under Rule 173Q(bb) can be levied where recovery of alleged inadmissible MODVAT credit is held to be barred by limitation or the demand is otherwise dropped - HELD THAT: - The Tribunal examined its earlier decision in Cornerstone Brands Ltd., where a demand for duty was dropped (on facts of inadequacy of evidence) and the Tribunal held that penalty could not be imposed. Applying that precedent, the Tribunal observed that although, in general, limitation may not strictly apply to imposition of penalty, when the department's demand for duty is dropped or held to be barred (resulting effectively in the department accepting non-recovery), the circumstances are analogous to the precedent and the imposition of penalty is inappropriate. On the facts before it the recovery of duty had been disallowed as barred by limitation; following the cited decision, the Tribunal was constrained to set aside the penalty and allow the appeal. The Tribunal therefore applied the precedent as determinative and granted consequential relief as per law. [Paras 5]Appeal allowed; penalty set aside in view of the precedent that penalty cannot be imposed where the demand of duty is dropped or held barred.Final Conclusion: The Tribunal allowed the appellant's appeal and set aside the penalty under Rule 173Q(bb), holding that where the demand for recovery of MODVAT credit is dropped or held barred by limitation (as in the cited precedent), imposition of penalty is not sustainable; consequential relief to follow as per law. Issues:1. Imposition of penalty for wrongful availment of credit barred by limitation.Analysis:The case involved the question of whether a penalty can be imposed for wrongful availment of credit as barred by limitation. The appellant, engaged in the manufacture of pharmaceutical products, received bulk drugs at a concessional rate of duty but took a higher notional credit. The department issued a show cause notice proposing the recovery of the modvat credit wrongly taken and the imposition of a penalty. The Order-in-Appeal confirmed the demand but held that the recovery of duty was barred by limitation. However, it upheld the imposition of the penalty on the grounds that limitation does not apply to penalties.The appellant argued that the imposition of the penalty was unlawful, especially in cases where the breach was technical. Citing a precedent where the demand of duty was dropped, the appellant contended that the invocation of Rule 173Q for imposing a penalty was incorrect. The Collector (appeals) dismissed the department's claim regarding the demand of duties as barred by limitation but upheld the levy of the penalty, leading to the present appeal.During the hearing, the appellant did not appear, and the Ld. SDR for the Revenue argued that the case at hand differed from the precedent cited by the appellant. Referring to the judgment in a similar case, it was noted that when the demand of duty was dropped due to inadequacy of evidence, the Tribunal held that a penalty cannot be imposed. Despite the argument that limitation may not apply to the levy of penalties, the Tribunal was constrained to follow the precedent decision favoring the assessee. Consequently, the appeal was allowed with any consequential relief according to the law.