2006 (3) TMI 572 - AT - Central Excise

Summary

Issues Involved:
Irregular availment of Modvat credit and imposition of penalty under Rule 13 of the Cenvat Rules, 2002.

Analysis:
The appeal involved the irregular availment of Modvat credit, which was reversed by the respondent even before the show cause notice was issued. Despite this, a penalty was imposed by the original authority, which was later set aside by the Commissioner (Appeals) following the precedent set by the Tribunal's decision in a similar case. The department appealed against the setting aside of the penalty and interest by the Commissioner (Appeals).

During the hearing, the department contended that the precedent cited by the Commissioner (Appeals) was not applicable to the present case as it dealt with a different section of the Central Excise Act. They argued that the provisions of Section 11AC did not apply to Modvat credit. The respondent, on the other hand, argued that the provisions of Section 11AC and Rule 13 of Cenvat Credit Rules, 2002 were similar, and therefore, the precedent should apply to their case as well.

After considering the arguments from both parties, the judge found that the precedent cited by the Commissioner (Appeals) was not directly applicable to the case at hand. The judge held that the decision regarding penalty under Section 11AC did not relate to Modvat credit. Therefore, the Commissioner (Appeals) was incorrect in setting aside the penalty, and the original penalty imposed by the Assistant Commissioner was upheld.

Regarding the issue of interest, the judge noted that the precedent cited was silent on this aspect and clarified that the provisions of Section 11AC applied to duty only, not to credit. Therefore, the judge upheld the decision of the Commissioner (Appeals) to set aside the interest.

In conclusion, the judge set aside the Commissioner (Appeals)'s decision to set aside the penalty and upheld the original penalty imposed by the Assistant Commissioner. However, the decision to set aside the interest was upheld. The appeal was disposed of accordingly.