2003 (6) TMI 369 - AT - Central Excise

Summary

Issues:
Validity of penalty under Rule 173Q imposed on the respondents for wrongly availing Modvat credit.

Analysis:
The Revenue challenged the order-in-appeal of the Commissioner setting aside the penalty under Rule 173Q imposed on the respondents for wrongly availing Modvat credit. The respondents, engaged in manufacturing CR coils and sheets, availed credit based on job work challan under Rule 57F(4) but failed to follow the correct procedure. The penalty was imposed for this lapse, although duty demand was dropped. The Commissioner (Appeals) set aside the penalty, leading to the appeal.

The Counsel argued that no penalty should be imposed for a minor error without revenue loss, citing legal precedents. However, the learned JDR supported the original penalty. The judge noted that the respondents' failure to follow the correct procedure constituted a breach of statutory rules, justifying the penalty under Rule 173Q. The judge disagreed with the argument that the absence of intent to evade duty should preclude penalty imposition for rule violations.

The judge referenced legal cases to support the decision, emphasizing that the respondents' failure to adhere to the prescribed procedure warranted the penalty. The judge distinguished this case from precedents where penalties were not imposed due to specific circumstances. Ultimately, the judge ruled in favor of the Revenue, setting aside the Commissioner (Appeals) order and restoring the original penalty. Both appeals by the Revenue were allowed based on the judge's analysis of the case.

This comprehensive analysis highlights the key legal arguments, precedents, and the judge's reasoning behind upholding the penalty under Rule 173Q in the case of wrongly availed Modvat credit by the respondents.