2002 (4) TMI 775 - AT - Central Excise

Summary

Issues: Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

The judgment pertains to an appeal against the imposition of a penalty under Rule 173Q of the Central Excise Rules, 1944. The appellant was alleged to have removed Modvat inputs without payment of duty or reversal of Modvat credit. The Assistant Commissioner imposed a penalty on the appellant, which was contested on the grounds that the duty amount was debited immediately upon discovering the mistake, well before the show cause notice was issued. The appellant argued that the removals were not clandestine as they were covered by delivery challans. However, the authorities rejected these pleas, leading to the appeal.

The appellant contended that the penalty under Rule 173Q should not be imposed since the duty amount was debited promptly upon realizing the error, citing precedents such as BPL Sanyo Utilities & Appliances Ltd. v. Commissioner of Customs, Bangalore, Sub Zero Icecream (P) Ltd. v. Commissioner of Central Excise, Bangalore, and R.S. Graphics v. Commissioner of Central Excise, Chennai. On the other hand, the Departmental Representative supported the penalty imposition, arguing that the cited precedents were not applicable to the present case as the show cause notice was issued for both raising a demand and imposing a penalty under Rule 173Q, despite the duty being remitted before the notice.

Upon careful consideration, the judge noted that the duty was voluntarily paid by the appellant even before the show cause notice was issued. Referring to precedents like Siemens Ltd. v. CCE, Aurangabad and Sub Zero Icecream Pvt Ltd., the judge highlighted that penalties are not imposable when corrective actions are taken before the issuance of a show cause notice. The judge emphasized that the appellant rectified the mistake promptly upon discovery, indicating no deliberate intent to evade duty. The judge disagreed with the Revenue's arguments, finding no justification for imposing a penalty in this case. Consequently, the penalty was set aside, and the appeal was allowed.