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2003 (8) TMI 270 - AT - Central ExcisePenalty on Executives - Demand - Limitation - Extended period - Invocation of - Modvat/Cenvat - Recovery of credit - Appeal to Appellate Tribunal - New plea
Issues Involved:
1. Irregular Availment of Modvat Credit 2. Misutilization of Modvat Credit on Capital Goods 3. Imposition of Penalty on the Company and its Executives 4. Invocation of Extended Period for Demand 5. Compliance with Rule 57GG and Procedural Lapses 6. Legitimacy of Trading Operations and Invoices 7. Recovery of Irregularly Availed Modvat Credit 8. Personal Penalties on Executives under Rule 209A Issue-wise Detailed Analysis: 1. Irregular Availment of Modvat Credit The manufacturing assessee, M/s. BSAL, availed Modvat credit on billets purchased from M/s. RINL without physically receiving them in their factory. The billets were transported directly to other locations, and M/s. BSAL forged invoices and made fictitious entries to show as if the inputs were received in their factory. The Commissioner found that M/s. BSAL availed Modvat credit of Rs. 66,84,055/- without actually receiving the goods in their factory. 2. Misutilization of Modvat Credit on Capital Goods M/s. BSAL availed Modvat credit of Rs. 1,63,760/- on capital goods and misutilized it for payment of duty on excisable goods neither manufactured nor removed from their factory. The Commissioner confirmed the demand for this amount under Rule 57U of the Central Excise Rules, 1944. 3. Imposition of Penalty on the Company and its Executives A penalty of Rs. 50 lakhs was imposed on M/s. BSAL under various rules for the contraventions alleged. Personal penalties were also imposed on the Managing Director, Joint Managing Director, Assistant General Manager, and Officer (Central Excise) under Rule 209A. However, the Tribunal found that no evidence was brought on record to show that the executives had knowledge or reason to believe that they were dealing with goods liable to confiscation. Therefore, the penalties on the executives were set aside. 4. Invocation of Extended Period for Demand The Commissioner invoked the extended period under Section 11A of the Central Excise Act, 1944, for the recovery of irregularly availed Modvat credit. The Commissioner found that there were deliberate acts of misrepresentation and suppression by M/s. BSAL. However, the Tribunal found that the extended period could not be invoked as the activity was within the knowledge of the Department. 5. Compliance with Rule 57GG and Procedural Lapses M/s. BSAL did not follow the prescribed procedure under Rule 57GG for registered dealers. The Commissioner imposed a heavy penalty for this non-compliance. However, the Tribunal found that the Department had an obligation to guide the assessee on the correct procedure, and since Revenue interests were not jeopardized, the penalty was not justified. 6. Legitimacy of Trading Operations and Invoices The Commissioner did not recognize the trading operations carried out by M/s. BSAL as legitimate. The Tribunal, however, found that the trading operations and the issuance of invoices were within the knowledge of the Department, and the extended period of limitation could not be invoked. 7. Recovery of Irregularly Availed Modvat Credit The Commissioner ordered the recovery of Rs. 71,91,752.46 as irregular Modvat credit availed by M/s. BSAL. The Tribunal found that the credit availed was Rs. 66,84,054/-, and this amount had already been reversed by debits made by M/s. BSAL. Therefore, no further recovery was warranted. 8. Personal Penalties on Executives under Rule 209A The Tribunal set aside the personal penalties imposed on the executives under Rule 209A, finding that there was no evidence of their knowledge or reason to believe that they were dealing with goods liable to confiscation. Conclusion: The Tribunal set aside the impugned order and allowed the appeals, finding that M/s. BSAL had paid more duty than the Modvat credit availed, and there was no justification for the penalties imposed. The Tribunal also found that the extended period for demand could not be invoked, and the personal penalties on the executives were not maintainable.
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