2003 (1) TMI 359 - AT - Central Excise

Summary

Issues:
Validity of penalty under Rule 173Q imposed by Commissioner (Appeals).

Analysis:
1. The appellants contested the penalty of Rs. 2,00,000/- under Rule 173Q imposed by the Commissioner (Appeals) through an order-in-appeal. The facts revealed that the appellants, an SSI unit manufacturing M.S. Tubes, utilized Cenvat credit wrongly, resulting in a short payment of duty. The Additional Commissioner confirmed the duty, interest, and imposed the penalty after a show cause notice.

2. The confirmation of duty and interest was not disputed by the appellants as they violated Rule 173-G(1)(a) and Rule 57AB. The appellants utilized credit wrongly, leading to a short payment of duty. The Counsel did challenge the penalty under Rule 173Q, arguing lack of intention to evade duty and citing relevant case laws.

3. The Counsel argued that the penalty should not apply as the duty was paid with interest before the show cause notice and there was no intention to evade duty. However, the JDR contended that penalty could be imposed for evading duty even without mala fide intention, citing legal precedents.

4. The Judge found the Counsel's argument mis-conceived. The appellants made an illegal overdrawal from their Cenvat credit account, violating rules. While duty was paid before the notice, the liability for penalty under Rule 173Q remained. The Judge rejected the argument of lack of mala fide intention, stating the appellants rectified their fault only after being caught by the department.

5. The Judge clarified that the provisions of sub-section (2B) of Section 11A did not absolve the appellants from penalty. The Judge differentiated the present case from relevant case laws cited by the Counsel, concluding that the penalty was rightly imposed. However, considering the circumstances, the penalty amount was reduced to Rs. 50,000/-.

6. The Judge upheld the impugned order of the Commissioner (Appeals) except for the reduction in the penalty amount. The appeal was disposed of accordingly, affirming the imposition of penalty under Rule 173Q but reducing the penalty amount to Rs. 50,000/-.