2003 (10) TMI 545 - AT - Central Excise

Penalty - Cenvat/Modvat - Non-compliance of Modvat Rules - Demand - Clandestine removal of modvatable inputs

Summary

Issues:
1. Demand issued under Section 11A read with Rule 9(2) for removal of imported copper wire bars after taking Modvat credit.
2. Confirmation of demands and penalties by Commissioner (Appeals) based on confession of illicit removal.
3. Recovery of input credit under Rule 57F.
4. Applicability of penalties under Rule 209 and 209A.
5. Compliance with Modvat rules and confiscation of goods.
6. Upholding of penalties under Rule 209 and 209A.

Analysis:
1. The demand in the case was issued under Section 11A read with Rule 9(2) for the removal of imported copper wire bars after taking Modvat credit. The charge was that the appellants had removed the bars, and the demands were confirmed.

2. The Commissioner (Appeals) confirmed the demands and penalties based on the confession of illicit removal of modvatable inputs. The absence of corroborating material was not deemed necessary due to the confession, leading to the confirmation of demands and penalties under Rule 209 on the assessee and under 209A on the partner.

3. The date of visit and detection was in October '96, during which Rule 57F allowed for a 'deemed' manufacture for the recovery of input credit when inputs were recovered as such. The credit was successfully recovered in this case.

4. The penalties imposed on the manufacturer under Rule 209 were challenged, asserting that the manufacturer could not be penalized for a Modvat rules non-compliance without a finding of confiscation of goods or any such allegation in the show cause notice. The penalties under Rule 209 and 209A were deemed unsustainable.

5. Since no goods were alleged to be liable for confiscation in the show cause notice, penalties under Rule 209A could not be imposed on any person. The penalties under Rule 209 and 209A were consequently deemed not sustainable.

6. Considering the above findings, the order was deemed unsustainable, leading to the allowance of the appeal. The penalties under Rule 209 and 209A were not upheld, and the appeal was allowed accordingly.