2004 (1) TMI 595 - AT - Central Excise

Summary

Issues:
Challenge to imposition of penalty under Section 11A and Rule 173Q for inadmissible Modvat credit.

Analysis:
The appellants contested the order of the Adjudicating Authority confirming the demand for inadmissible Modvat credit and imposing penalties under Section 11A and Rule 173Q. The appellants argued that the entire inadmissible credit amount had been reversed before the show cause notice, thus no penalty should be imposed. They also claimed that the show cause notice did not mention invoking the extended period, which they believed was necessary for confirming the demand. Additionally, they challenged the penalty under Section 11AC, stating that short payment did not constitute suppression of facts, and the penalty under Rule 173Q was disputed on the grounds of early credit reversal.

The Tribunal carefully considered the submissions and case laws cited by the appellants. It was noted that the appellants had indeed taken inadmissible credit, as confirmed by the show cause notice which indicated suppression of facts and misrepresentation. The notice highlighted discrepancies in input quantities and credit utilization, pointing towards suppression by the appellants. The Tribunal clarified that specific terminology or phrases were not mandated in the show cause notice for invoking the extended period, as long as the intention was communicated to the appellants. Therefore, the notice was deemed compliant with the requirements of Section 11A, and no infirmity was found.

Moreover, the Tribunal concluded that taking inadmissible credit led to duty evasion on cleared goods. The appellants failed to prove that the inadmissible credit was not utilized, resulting in evasion. The Tribunal upheld the application of Sections 11AC and 11AB in this case, dismissing the appellants' arguments based on cited case laws. Regarding the penalty under Rule 173Q, the Tribunal referenced conflicting judgments but ultimately followed the Supreme Court's ruling that such penalties were mandatory, irrespective of mens rea. Consequently, the lower authorities were deemed justified in imposing penalties, and the appeal was rejected, upholding the impugned order.