2006 (3) TMI 682 - Commission - Central Excise

Summary

Issues: Settlement of proceedings initiated through Show Cause Notice regarding excise duty payment on spare parts procured by a manufacturing company.

In this judgment delivered by the Settlement Commission for Customs and Central Excise, the Applicant, a manufacturing company engaged in the production of motor cars and parts, filed an application for settlement of proceedings initiated through a Show Cause Notice issued by the Commissioner of Central Excise. The Applicant was involved in trading activities through their Customer Care Parts Trading Division, procuring replacement parts from various sources. The dispute arose when the department noticed that the Applicant had not reversed the Modvat credit availed on non-manufactured in the factory (Non-MIP) spare parts, leading to a demand for differential duty. The Applicant admitted to a portion of the demanded amount and had already reversed a significant sum before the issuance of the Show Cause Notice. They explained the complexity of their operations involving thousands of part numbers and devised a method of calculation to determine the equivalent credit to be reversed. The Applicant acknowledged an error in the calculation related to duty on 'tool cost' and promptly paid the amount. The Advocate representing the Applicant argued that the error was unintentional and not mala fide, emphasizing the steps taken by the company to rectify the situation, including the development of a system software for accounting spare parts transactions. The Advocate cited a precedent to support the waiver of penalty due to a sufficient balance in the account. On the Revenue side, it was contended that the trading activities were conducted without proper permission and penalties should be imposed. Following a detailed review of submissions from both parties, the Commission noted the Applicant's efforts in implementing a system-generated report for accurate transactional accounting, demonstrating their commitment to tax compliance. Considering the sincerity shown by the Applicant and their substantial credit balance during the relevant period, the Commission settled the case under Section 32 F(7) of the Central Excise Act, 1944. The duty liability was fixed at a specific amount, which had already been paid, and the Applicant was granted immunity from interest, penalty, and prosecution. The settlement was made subject to the conditions outlined in Section 32K(1) of the Act, with a caution that any fraudulent or misrepresented information could render the settlement void.