2009 (8) TMI 1012 - AT - Central Excise

Summary

Issues:
1. Appellant's failure to reverse Modvat credit on a generator sold without following central excise procedures.
2. Allegations of evasion of duty and penalty imposition under Rule 57U(6) and Rule 173Q of Central Excise Rules, 1944.
3. Appellant's challenge regarding penalty imposition under Rule 57U(6) specifically.

Issue 1:
The appellant, a manufacturer of goods under Chapter 39 of the Central Excise Tariff Act, 1985, faced allegations of not properly accounting for a diesel generating set sold without reversing Modvat credit. The failure to follow central excise procedures led to a show cause notice being issued, demanding payment of Rs. 1,32,727 under Rule 57U(2) of Central Excise Rules, 1944. The Additional Commissioner confirmed a demand of Rs. 83,912 towards Modvat credit, interest, and penalties under various provisions.

Issue 2:
Aggrieved by the Order-in-Original, the appellant appealed, challenging the penalty imposed under Rule 57U(6) and Rule 173Q of Central Excise Rules, 1944. The Commissioner (Appeals) upheld the penalty, citing the appellant's failure to discharge duty liability on capital goods removal. The appellant, through their counsel, contested only the penalty under Rule 57U(6), arguing that they correctly availed credit on capital goods and were eligible for it.

Issue 3:
Upon careful consideration, the Tribunal found that the appellant had indeed taken eligible Cenvat credit on capital goods but failed to pay proper duty upon removal. The appellant acknowledged the non-payment and settled the duty. The Tribunal upheld the penalty under Rule 173Q, as the appellant did not challenge it. However, regarding the penalty under Rule 57U(6), the Tribunal noted that the rule allows penalties only for wrongful credit taken with intent to evade duty. Since there was no evidence of fraud or intention to evade duty, the penalty under Rule 57U(6) was deemed incorrect and unwarranted.

In conclusion, the Tribunal partially allowed the appeal by setting aside the penalty imposed under Rule 57U(6) while upholding the penalty under Rule 173Q. The judgment clarified the specific conditions under which penalties could be imposed under Rule 57U(6) and emphasized the importance of intent to evade duty for such penalties.