2002 (2) TMI 607 - AT - Central Excise

Summary

Issues:
1. Challenge against penalty confirmed by Commissioner (Appeals)
2. Challenge against availment of Modvat credit for rejected goods

Analysis:

Issue 1: Challenge against penalty confirmed by Commissioner (Appeals
The appellant, M/s. Para Coat Products Ltd., contested the penalty confirmed by the Commissioner (Appeals) under the impugned order. The appellant argued that they did not include the value of goods received back under Rule 173-H of the Central Excise Rules while declaring the aggregate value of clearance of excisable goods, as they believed it was not includible. They voluntarily paid the duty upon realization of the error. The appellant asserted that the circumstances did not warrant invoking Section 11AC of the Central Excise Act for imposing a penalty equivalent to duty, as there was no wilful misdeclaration or suppression. They highlighted that the rejected goods were to be reprocessed and cleared again, leading to potential double taxation if included in the value. The appellant relied on precedents like Engineers Combine v. C.C.E., New Delhi and G.S. Marbles (P) Ltd. v. C.C.E., Jaipur-II to support their arguments. The Tribunal acknowledged the duty payment but reduced the penalty from Rs. 3,71,505 to Rs. 50,000, exercising discretion under Section 11A.

Issue 2: Challenge against availment of Modvat credit for rejected goods
The Revenue challenged the availment of Modvat credit for rejected goods by the appellant. The Commissioner (Appeals) allowed the Modvat credit but directed the Adjudicating Authority to verify if the rejected goods underwent re-manufacturing. The Revenue contested the setting aside of the penalty imposed for Modvat credit availment. They argued that the proviso to Section 11A was invoked in the show cause notice, alleging wilful suppression and misdeclaration by the appellant to evade duty. The Revenue cited the decision in Jay Yuhshin Ltd. v. C.C.E., New Delhi to emphasize that the availability of Modvat credit to customers does not negate the intent to evade duty. The Tribunal remanded the question of Modvat credit availability and the imposition of penalty on this issue back to the Adjudicating Authority for further examination.

In conclusion, the Tribunal upheld the duty demand against the appellant but reduced the penalty amount. The question of Modvat credit availability and the associated penalty was remanded for reevaluation. Both appeals were disposed of accordingly.