2007 (5) TMI 390 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit availed on capital goods.
2. Dropping of proceedings by the Commissioner of Central Excise due to limitation.
3. Imposition of penalty on the assessee.
4. Appeal by the Revenue against dropping of proceedings.
5. Appeal by the assessee against reversal of credit and penalty.

Issue 1: Disallowance of Modvat credit:
The case involved M/s. Ispat Industries, manufacturers of Hot Rolled Coils & Sponge Iron, facing disallowance of Modvat credit. A special audit in 2003 revealed irregularities in credit availed on capital goods. The Commissioner of Central Excise dropped proceedings due to limitation, but ordered reversal of credit and imposed a penalty. The Tribunal found that the Modvat records were available during the relevant period in 1998-99, and the demand in the show cause notice was barred by limitation. The Revenue's appeal was dismissed.

Issue 2: Dropping of proceedings by the Commissioner:
The Commissioner dropped proceedings initiated by the first show cause notice, citing limitation. The Tribunal upheld this decision, stating that the Modvat records were available and verified during the relevant period. As a result, the demand raised in the show cause notice dated 29-7-03 was deemed unsustainable and barred by limitation. The Revenue's appeal against this decision was dismissed.

Issue 3: Imposition of penalty:
The Commissioner imposed a penalty on the assessee for reversal of credit and non-production of documents. In the appeal, the assessee did not challenge the reversal of credit but argued against the penalty, claiming the excess credit was due to inadvertence. The Tribunal upheld the reversal of credit but set aside the penalty, finding no grounds for penal action due to the inadvertent nature of the excess credit.

Issue 4: Appeal by the Revenue:
The Revenue appealed against the dropping of proceedings initiated by the show cause notice dated 29-7-03. However, the Tribunal upheld the Commissioner's decision, stating that the demand was barred by limitation as the Modvat records were available and verified during the relevant period. The Revenue's appeal was dismissed accordingly.

Issue 5: Appeal by the assessee:
The assessee appealed against the reversal of credit and imposition of penalty. While not contesting the credit reversal, they argued against the penalty, attributing the excess credit to inadvertence. The Tribunal upheld the credit reversal but set aside the penalty, partially allowing the appeal by the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeal, upheld the dropping of proceedings due to limitation, and set aside the penalty imposed on the assessee, thereby partially allowing the appeal by the assessee.