2005 (2) TMI 682 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on soda ash due to procedural lapses.
2. Imposition of penalty for fraudulent conduct.

Analysis:

*Issue 1: Denial of Modvat credit on soda ash due to procedural lapses*

The case revolved around the denial of Modvat credit on soda ash by the department due to the appellants' failure to declare soda ash as an input under Rule 57G of the Central Excise Rules, 1944. The appellants argued that the credit should not be disallowed solely based on the procedural lapse of non-filing of declaration since the duty-paid nature of the input and its utilization in manufacturing sodium silicate were not disputed. The Tribunal noted that even though the appellants had initially not declared soda ash as a raw material, they subsequently rectified this by adding soda ash to the declaration. The Tribunal highlighted that Modvat/Cenvat credit cannot be denied based on procedural lapses like non-filing or belated filing of declarations. The legal position was supported by a Circular dated 23-2-1999 and the Tribunal's precedent in the case of Kamakya Steels. Consequently, the Tribunal held that the appellants should be given the benefit of the amended provisions of Rule 57G, which have retrospective application.

*Issue 2: Imposition of penalty for fraudulent conduct*

The department alleged fraudulent conduct on the part of the assessee based on the addition of soda ash to the declaration behind the back of the department. The Commissioner (Appeals) upheld this finding of fraud against the assessee. Despite the fraudulent conduct, the penalty imposed was considered lenient at Rs. 5,000. The Tribunal, while acknowledging the fraudulent behavior, upheld the penalty as there was no challenge from the department's side. Therefore, the penalty was sustained, and the appeal was allowed in part, setting aside the denial of Modvat credit while upholding the penalty imposed.

In conclusion, the Tribunal's judgment clarified that Modvat credit should not be denied based on procedural lapses and upheld the penalty for fraudulent conduct, emphasizing the duty-paid nature and utilization of the input in question.