2003 (9) TMI 667 - AT - Central Excise

Summary

Issues:
Violation of conditions of Notification No. 13/97-Cus., imposition of duty, disallowance of Modvat credit, penalty under Rule 173Q.

Violation of conditions of Notification No. 13/97-Cus.:
The case involved the respondents, engaged in manufacturing Glass Parts for Black and White Television Picture Tubes, availing the benefit of Modvat credit. They imported goods under Notification No. 13/97-Cus. at a concessional rate of duty, with the condition that the goods must be used for manufacturing their final products. However, instead of using the imported goods for manufacturing, the respondents used them for repair and resale to other manufacturers. The adjudicating authority imposed customs duty and CVD on the imported goods used for purposes other than manufacturing final products. The Commissioner (Appeals) upheld the duty demand but set aside the penalty under Rule 173Q, stating lack of intent to evade duty. The Revenue appealed against the penalty being set aside, arguing that the respondents did not fulfill the conditions of the concessional duty and should be penalized.

Imposition of duty:
The adjudicating authority ordered the recovery of customs duty and CVD on the imported goods used for repair and other purposes instead of manufacturing final products. The duty amounts were specified for different categories of usage, and the Modvat credit on such non-compliant usage was disallowed and ordered to be recovered under the Central Excise Rules. The penalty of Rs. 50,000 was imposed for violating Central Excise Rules. On appeal, the Commissioner (Appeals) upheld the duty demand but set aside the penalty, leading to the Revenue filing an appeal to reinstate the penalty. The Tribunal held that the respondents, being aware of the conditions of the concessional duty, were liable for penal action, and thus, the penalty was reinstated.

Disallowance of Modvat credit:
The Modvat credit amounting to different categories of non-compliant usage of imported goods was disallowed by the adjudicating authority under the Central Excise Rules. The credit disallowed was ordered to be recovered, and the penalty under Rule 173Q was imposed for violating Central Excise Rules. The Commissioner (Appeals) upheld the disallowance of Modvat credit but set aside the penalty, stating no intent to evade duty. The Revenue appealed against the penalty being set aside, arguing that the respondents should be penalized for not fulfilling the conditions of the concessional duty. The Tribunal restored the order of the adjudicating authority, disallowing the Modvat credit and reinstating the penalty.

This detailed analysis of the legal judgment highlights the issues of violation of conditions of Notification No. 13/97-Cus., imposition of duty, disallowance of Modvat credit, and penalty under Rule 173Q, providing a comprehensive overview of the case and the Tribunal's decision.