2009 (11) TMI 725 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944 without prior notice to the appellant.

Analysis:
The appeal involved a case where the appellants availed Modvat credit on inputs from a supplier, and upon verification, it was found that some of the input gate passes were fictitious. The Superintendent issued a demand notice to reverse the credit, which was complied with. Subsequently, a show cause notice was issued for imposing a penalty. The appellant contested the penalty imposition, arguing that they were not given prior notice before confirming the credit. The Adjudicating Authority imposed a penalty under Rule 173Q for not exercising caution while availing Cenvat credit. The appellant claimed that since they were not given notice, the amount should be refunded, and the penalty set aside.

The judge observed that the appellant did not contest the verification report seriously and had not sought a speaking order from the lower authorities. The judge noted that the appellant should have contested the demand note under protest to reserve the right for claiming a refund. The appellant's lack of caution in availing credit on fictitious gate passes was highlighted, and it was found that they contravened Rule 173Q(1)(bb) by not ensuring appropriate duty payment on inputs. Despite reversing the credit as directed, the appellant was found to have violated the rule.

The judge upheld the imposition of the penalty under Rule 173Q but reduced it from Rs. 12,000 to Rs. 5,000. It was emphasized that the penalty imposition should have been sympathetically considered given the circumstances. The appeal was disposed of with the modified penalty amount, affirming the imposition under the Central Excise Rules, 1944.