2003 (8) TMI 398 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit for weigh bridges installed away from the factory.
2. Imposition of penalty for irregular availment of Modvat credit.

Analysis:
1. The appellant's Modvat credit of Rs. 1,24,488/- for weigh bridges installed away from the factory during Jan. to Dec., 1998 was disallowed by the authorities under Rule 57Q of the Central Excise Rules, 1944. The disallowance was based on the ground that such weigh bridges were not eligible capital goods for Modvat credit. Additionally, a penalty of Rs. 25,000/- was imposed on the appellants for irregular availment of the credit. The appellant challenged this decision through the present appeal.

2. The appellant's counsel acknowledged that the issue of eligibility of capital goods installed outside the factory for Modvat credit had been settled by the Supreme Court and the Tribunal's Larger Bench in previous cases. The appellant's counsel argued for the penalty to be vacated, citing the appellant's belief, based on certain case law, that the weigh bridges were eligible capital goods. The Departmental Representative (DR) contended that no bona fide belief could have existed in this case, emphasizing the specific context of the manufacturing process discussed in previous judgments.

3. Upon careful examination of the submissions, the main issue remaining was the sustainability of the Rs. 25,000/- penalty imposed by the lower authorities. The appellants claimed that they took the Modvat credit under a bona fide belief that the weighment of sugarcane on the weigh bridges was integral to the sugar manufacturing process. However, the presiding judge found this argument unconvincing, noting that no plea of bona fide belief was raised earlier and that the current plea seemed like an afterthought. The judge reduced the penalty to Rs. 15,000/- considering the facts and circumstances of the case, emphasizing that the penalty should match the offense alleged and found by the authorities.

In conclusion, the appellate tribunal allowed the application for waiver of pre-deposit, disposed of the appeal, and reduced the penalty imposed on the appellants from Rs. 25,000/- to Rs. 15,000/- based on the analysis of the issues related to the disallowance of Modvat credit and the imposition of the penalty for irregular availment of the credit.