2003 (9) TMI 625 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty on the appellant for availing Modvat credit erroneously.
2. Contention regarding the intention of the appellant to evade duty or defraud the Revenue.
3. Reversal of credit by the appellant before the issuance of the show cause notice.

Analysis:
Issue 1: The appellant, engaged in soap manufacturing, erroneously availed Modvat credit for an input without realizing the nature of the Bills of Entry. Despite reversing the credit upon realizing the mistake and informing the Department, a penalty of Rs. 2 lakhs was imposed by the original and appellate authorities.

Issue 2: The appellant argued that there was no intention to evade duty or defraud the Revenue, as the reversal of credit was promptly done upon discovering the error. It was contended that under such circumstances, no penalty should have been imposed.

Issue 3: The Tribunal acknowledged that the appellant had indeed reversed the credit before the show cause notice was issued, indicating a lack of intent to defraud the Revenue. Given the appellant's immediate corrective actions upon discovering the error, the Tribunal found no justification for the imposition of the penalty. Consequently, the Tribunal set aside the order imposing the penalty and allowed the appeal in favor of the appellant.