2010 (1) TMI 1086 - AT - Central Excise

MODVAT/CENVAT credit - clandestine removal - Rule 57F(4) read with Rule 57A - penalties under Rule 209A

Issues Involved:
1. Admissibility of additional documentary evidence.
2. Nature of the dispute regarding the clearance of raw materials.
3. Duty liability of the assessee.
4. Invocation of the Central Excise Rules, 1944 post their omission.
5. Imposition of penalties on the assessee and its General Manager.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Documentary Evidence:
The appellant filed a miscellaneous application to submit additional documentary evidence. The Tribunal noted that the documents sought to be introduced were available with the assessee for a long time and were not presented earlier despite multiple opportunities. The Tribunal emphasized that under Rule 23 of the CESTAT (Procedure) Rules, fresh evidence could only be accepted if sufficient and valid reasons were provided, which the assessee failed to do. Consequently, the application for additional evidence was rejected.

2. Nature of the Dispute Regarding the Clearance of Raw Materials:
The dispute originated from a show-cause notice issued on 2-4-1998, proposing to recover duty from the assessee for the period March 1993 to January 1998. The officers found copper rods at a godown without duty-paying documents. The assessee admitted to sending raw materials for job work under "Advice Notes" without payment of duty or reversal of MODVAT credit. The original authority confirmed the duty demand and imposed penalties, which were upheld by the Commissioner (Appeals).

3. Duty Liability of the Assessee:
The Tribunal found no reason to interfere with the lower authorities' decision regarding the duty liability. The General Manager and Excise Clerk admitted to clearing raw materials without payment of duty, and the assessee failed to provide evidence that the materials were returned after job work and used in the manufacture of finished goods cleared on payment of duty. The duty liability of Rs. 4,09,455/- was thus upheld.

4. Invocation of the Central Excise Rules, 1944 Post Their Omission:
The Tribunal addressed the argument that the Central Excise Rules, 1944, were omitted without a saving clause, making post-31-3-2000 proceedings under these rules invalid. However, the Tribunal referred to Section 38A of the Central Excise Act, which allows for the continuation of proceedings even after the repeal of rules. The Tribunal also cited the Larger Bench decision in Kisan Sahakari Chini Mills Ltd. and the Supreme Court's judgment in Smithkline Beecham Consumer Health Care Ltd., supporting the continuation of proceedings under the omitted rules. Thus, the preliminary objection regarding the invocation of the 1944 Rules was rejected.

5. Imposition of Penalties on the Assessee and Its General Manager:
The Tribunal found the imposition of a composite penalty under Rule 57-I(4) and Rule 173Q problematic, noting that Rule 57-I(4) was introduced only from 23-7-1996 and could not be applied retrospectively. The penalty was imposed without proper application of mind and was thus set aside. Regarding the General Manager, the Tribunal found that the lower authorities did not provide sufficient reasons or evidence that he physically dealt with the goods in question. The penalty on the General Manager was also set aside due to the lack of a clear finding of penal liability under Rule 209A.

Conclusion:
The Tribunal upheld the duty demand of Rs. 4,09,455/- against the assessee but set aside the penalties imposed on both the assessee and its General Manager. The miscellaneous application for additional evidence was rejected, and the preliminary objection regarding the invocation of the Central Excise Rules, 1944, post their omission was dismissed.

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