2006 (9) TMI 415 - AT - Central Excise

Summary

Issues involved:
1. Imposition of penalties under Rule 173Q read with Rule 13 of Cenvat Credit Rules, 2002.
2. Violation of Rule 13 in taking credit on unused inputs.

Analysis:

1. The case involved the imposition of penalties on a manufacturer of medicine for not utilizing Modvat credit on inputs for about 2 years, despite reversing the credit and paying interest as per the Revenue authorities' request. The Commissioner (Appeals) set aside the penalties based on the decision in the case of Machino Montell (I) Ltd., stating that no penalty was imposable once the credit was reversed before the issuance of show cause notices. The Revenue appealed against this decision. The issue revolved around the interpretation of Rule 173Q read with Rule 13 of the Cenvat Credit Rules, 2002.

2. The Revenue contended that there was a violation of Rule 13 by taking credit on inputs not used in the manufacture of final products. Rule 13 of the Cenvat Credit Rules, 2002, deals with confiscation and penalties for wrongly taking CENVAT credit on inputs. However, in this case, the Tribunal found that Rule 13 did not apply as the inputs were intended for future manufacturing use, and the credit was not wrongly taken. Therefore, the appeals were rejected due to the lack of legal or factual basis for imposing penalties under Rule 13.

In conclusion, the Tribunal dismissed the appeals, emphasizing that the penalties imposed under Rule 173Q read with Rule 13 of the Cenvat Credit Rules, 2002, were not justified in the circumstances where the credit on inputs, although not utilized immediately, was not wrongly taken and was intended for future manufacturing purposes.