2002 (4) TMI 877 - AT - Central Excise

Summary

Issues:
1. Reversal of Modvat credit on plastic granules.
2. Imposition of penalty on the company.
3. Imposition of penalty on the Managing Director.

Analysis:

Reversal of Modvat credit on plastic granules:
The case involved the appellant, a manufacturer of co-extruded multilayer films and flexible packing materials, who used plastic granules as inputs for their final product. The appellant had taken Modvat credit on duty paid plastic granules but failed to reverse the credit amount upon removal of 1,78,500 kgs of granules. The Additional Commissioner ordered the reversal of Modvat credit and imposed a penalty. The Commissioner (Appeals) upheld the decision. The appellant argued that the failure to reverse the credit was a clerical error promptly rectified upon discovery. The Tribunal found that the removal of granules without paying duty justified the reversal of Modvat credit. However, considering the circumstances, the penalty was reduced to Rs. 5.0 lacs on the company.

Imposition of penalty on the company:
The Tribunal acknowledged the appellant's claim of a clerical mistake but emphasized that the failure to reverse the Modvat credit at the time of removal was a violation. While upholding the imposition of a penalty, the Tribunal deemed the original penalty amount excessive and reduced it to Rs. 5.0 lacs. The Tribunal considered the substantial duty amount involved but concluded that a penalty equal to the credit was unwarranted in this case.

Imposition of penalty on the Managing Director:
Regarding the penalty imposed on the Managing Director, the Tribunal noted that he was abroad during the relevant period and had no involvement in the clearance of goods without duty payment. Consequently, the Tribunal set aside the penalty imposed on the Managing Director. The Tribunal emphasized that the Managing Director's absence from India during the material period absolved him of any responsibility regarding the removal of plastic granules without duty payment.

In conclusion, the Tribunal upheld the reversal of Modvat credit on plastic granules due to duty evasion, reduced the penalty on the company, and set aside the penalty imposed on the Managing Director due to his absence and lack of involvement in the violation.