2006 (2) TMI 336 - AT - Central Excise

Summary

Issues: Penalty under Rule 173Q for failure to file installation certificate for Modvat credit on capital goods.

The judgment pertains to an appeal against a penalty of Rs. 2,000 imposed on the appellant for availing Modvat credit on capital goods without filing the installation certificate as required by Rule 57Q(7). The original authority allowed the credit but imposed the penalty under Rule 173Q. The first appellate authority upheld the penalty, citing the mandatory nature of Rule 57Q(7). However, the appellant contested the penalty, arguing that the penalty provisions under Rule 173Q were not applicable in this case. The appellate tribunal noted that the penalty could be imposed under Clause (bb) or (d) of Rule 173Q(1). Clause (bb) pertains to irregular availing of Modvat credit, which did not apply as the credit was allowed by the authorities. As for Clause (d), which deals with contravention of rules with intent to evade duty, the tribunal found that while there was a contravention of Rule 57Q(7), there was no evidence of intent to evade duty by the appellant. Therefore, the penalty was deemed not applicable, and the appeal was allowed, vacating the penalty of Rs. 2,000.

In conclusion, the tribunal held that the penalty under Rule 173Q was not justified in this case as neither Clause (bb) nor Clause (d) applied to the appellant's situation. The decision underscores the importance of establishing intent to evade duty for the imposition of penalties under Rule 173Q. The judgment provides clarity on the interpretation of penalty provisions in cases of contravention of excise rules, emphasizing the need for evidence of intent to evade duty to invoke penalty clauses effectively.