2005 (4) TMI 503 - AT - Central Excise

Clandestine removal - Proof - Show cause notice - Cenvat/Modvat - Demand of credit - Penalty - Imposition of

Summary

Issues:
Challenge to validity of dropping recovery of Modvat credit amount; Time-barred demand; Confirmation of demand under Section 11A; Invocation of Rule 57-I for Modvat credit recovery; Validity of penalty imposition.

Validity of Dropping Recovery of Modvat Credit Amount:
The appeal revolved around the challenge to the validity of dropping the recovery of Modvat credit amount by the Commissioner (Appeals) from the respondents. The Revenue contended that the Modvat credit was availed on the shortage of inputs, which the respondents themselves admitted and reversed upon inspection. The Tribunal found that the Commissioner (Appeals) erred in dropping the recovery as the respondents failed to explain the shortage adequately. The burden was on the respondents to justify the shortage, and their admission led to the reversal of the credit, indicating their liability. Therefore, the Tribunal held that the recovery of the Modvat credit amount was justified.

Time-Barred Demand and Confirmation under Section 11A:
The legal issues raised included the time-barred nature of the demand and the demand confirmation under Section 11A. The Counsel argued that the demand was time-barred and could not be confirmed under Section 11A, suggesting Rule 57-I should have been invoked for Modvat credit recovery. However, the Tribunal found that the quoting of the wrong provision in the show cause notice did not invalidate it, especially when all essential details were provided. The respondents admitted to wrongly availing the Modvat credit and voluntarily reversed it before the notice. The Tribunal emphasized that the recovery of Modvat credit is akin to duty payment, and the respondents were not prejudiced by the misquoting of the law. Therefore, the Tribunal rejected the argument of time-barring the demand and confirmed the recovery of the Modvat credit amount.

Penalty Imposition:
Regarding the penalty imposition, the Counsel contended it was not imposable under the law. However, the Tribunal upheld the penalty along with the duty amount, as the respondents had not only wrongly availed the Modvat credit but also engaged in clandestine removal of finished goods without duty payment. The Tribunal confirmed the penalty imposition, stating that the respondents' actions warranted such consequences. Consequently, the appeal of the Revenue was allowed with the confirmation of the penalty and duty amount.

In conclusion, the Tribunal set aside the impugned order to the extent challenged, confirming the demand of the Modvat credit amount against the respondents and upholding the penalty imposition. The Tribunal's decision was based on the failure of the respondents to adequately explain the shortage of inputs leading to the reversal of Modvat credit, the inapplicability of time-barring due to voluntary reversal, and the justification for penalty imposition due to wrongful actions by the respondents.