2005 (6) TMI 554 - AT - Central Excise

Summary

Issues: Disallowance of modvat credit, imposition of penalties under Rule 173Q and Rule 209A

In this judgment by the Appellate Tribunal CESTAT Mumbai, the issue revolved around the disallowance of modvat credit amounting to Rs. 42,74,268.50 taken by a company engaged in manufacturing mild steel ingots, based on fake duty paid documents for M.S. scrap and wrongly taken credit for M.S. rods/bars/angles not utilized in manufacturing their final product. The Commissioner imposed penalties on the manufacturer and certain individuals under Rule 173Q and Rule 209A of the Central Excise Rules. The Tribunal upheld the recovery of the total modvat credit and penalty on the manufacturer, as evidence showed that credit was availed without actual receipt of duty paid inputs. The director of the company admitted liability, supported by statements from various traders. The recovery of Rs. 47,10,546.65 from the company was upheld, along with the penalty under Rule 173Q. However, penalties under Rule 209A on the directors of the company and traders were set aside based on the argument that unless goods are found liable for confiscation, penalties cannot be imposed under Rule 209A, citing precedent from a previous Tribunal order.

The Tribunal partially allowed the appeal filed by the company regarding the disallowance of modvat credit and penalties under Rule 173Q, upholding the recovery of the credit and penalty on the company. The appeals filed by the traders were allowed in full, setting aside the penalties imposed on them under Rule 209A.