TaxTMI 
TaxTMI 
2011 (3) TMI 289
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....rawing our attention to Rule 57(1)(4) and Rule 57-AH(2) of the Central Excise Rules, 1944 and placing reliance on the decision in the matter of Kalyani Brakes Ltd Vs CCE Aurangabad reported in 2003 (162) ELT 163 and Punjab Communications Ltd Vs CCE Chandigarh reported in 2002 (145) ELT 301 (Tri.-Del), the learned Advocate for the Appellants submitted that undisputedly when the credit was utilized, inputs in question were very much in existence and therefore, there is no case of wrongful availment or wrongful utilization of the credit. It is undisputed fact that the credit was availed prior to 1st January, 1998 and goods got destroyed after 1st January, 1998. Being so, according to the learned Advocate, there was neither any fraud nor misrepresentation nor suppression of any fact which could warrant imposition of penalty. He further submitted that the fact that the goods were no more available, having been destroyed, was clearly reflected in the balance sheet of the Appellant company for the relevant year. The learned Advocate, therefore, prays for setting aside the impugned order to the extent it imposes penalty. 4. The DR on the other hand, placing reliance on the decisi....
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....he Rules made thereunder with intention to evade payment of duty, the person who is liable to pay the amount equivalent to the credit disallowed, as determined under clause (iii) of sub-rule (1) shall also be liable to pay penalty equal to the credit so disallowed. Explanation-I to the said sub-rule provides that where credit disallowed is reduced by the Commissioner of Central Excise (Appeals), the Appellate Tribunal or as the case may be, a Court of law, the penalty shall be payable on such reduced amount of credit disallowed. Similar is the provision under Explanation-II in case of upward modification of allowance or disallowance of credit. 8. Rule 57-AH relates to subject of relief of credit wrongly taken Sub-rule (i) provides that where cenvat credit has been taken or utilized wrongly, the same along with interest shall be recovered from the manufacturer and provision of section 11-A, 11-AA, 11-AB of the Act shall apply mutantis-mutandis for effecting such recovery. Sub-rule (2) provides that where cenvat credit has been taken or utilized wrongly, on account of fraud, wilful misstatement, collusion or suppression of facts or contravention of any provision of the Act ....
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....ly when the inputs are used n the manufacture of final products and some of those inputs become waste during the course of manufacture of the final product, th credit already taken in respect of such inputs wasted was not to be denied. In the present case, the appellants record in form RDW had not been examined by the adjudicating authority with such understanding in view. He had taken a general view that in all cases the inputs were found defective before they were put to use. We consider that it would be in the interest of justice if the appellants are given an opportunity to explain their records and place evidence with regard to the specific inputs which had become waste during the course of manufacture of wrist watches. The issue with regard to shortages, may also be examined by the adjudicating authority to whom the matter is being remanded. The procedure adopted for destruction may also be examined by the adjudicating authority after given an opportunity to the appellants to present their case. 11. In the case of Asco (India) Ltd Vs CEGAT, Chennai reported in 2009 (238) ELT 397 (Mad.), the Madras High Court while rejecting the reference had observed with reference ....
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.... to reverse the credit. Admittedly, even after re-commencement of the factory of the Appellant, no steps were been taken by the appellants to reverse the credit or repay the amount. The requirement of reversal on account of destruction of inputs in question and credit earned by them and utilized was not disclosed to the department. Therefore, the obligation on the part of the appellant to reverse or repay credit was not complied with and hence there is suppression of the fact by the appellant. 16. It is also the contention of the learned Counsel for the appellant that in terms of relevant Rule, it cannot be said that there was wrong availment of the credit by the appellant. The contention of the appellant is that at the time of availment, the inputs in question were very much in existence and were useful in the process of manufacture of final product. 17. It is stated that Rule 57-(H) of erstwhile rules relating to Modvat Credit relates to credit taken wrongly and Rule 57 AH relates to credit taken or utilized wrongly and similar is the case in case of Rule 13 of Cenvat Credit Rules, 2001. The Tribunal in the case of Kalyani Brakes case while considering Rule 57....