2004 (8) TMI 582 - AT - Central Excise

Penalty - stock of the goods lying in the factory premises of the respondents - shortage of glass bottles and LDPE bags - the respondents availed the Modvat credit - They admitted the shortage and attributed the same to the clerical calculation mistake in the record - Held that - prayer of the Revenue for confirmation of the penalty - against the respondents under Rule 173-Q cannot be sustained as the penalty could only be imposed under Rule 57(i) which pertains to the imposition of penalty in the case of wrongful availment of the credit - The amount already deposited by the respondents shall be adjusted/appropriated accordingly towards the duty - appeal disposed of

Summary

Issues:
1. Validity of the impugned order reversing duty demand and imposing penalty.
2. Interpretation of Rule 9(2) in confirming duty demand.
3. Applicability of penalty under Rule 173-Q versus Rule 57(i).
4. Decision on setting aside the penalty and restoring the duty demand.

Analysis:

1. The appeal before the Appellate Tribunal challenged the validity of the order that reversed the duty demand of Rs. 28,762.73 and imposed a penalty of Rs. 25,000. The Commissioner (Appeals) had overturned the order-in-original that confirmed the duty demand. The respondents acknowledged the shortage of goods but attributed it to a clerical mistake. They partially debited the duty and deposited the remaining amount. The Commissioner (Appeals failed to consider these facts, leading to the Tribunal restoring the original order confirming the duty demand.

2. The Tribunal addressed the interpretation of Rule 9(2) in confirming the duty demand. Despite no shortage of finished goods, the shortage of inputs/raw materials attracted the demand of duty. The Tribunal emphasized that the show cause notice detailed all allegations regarding the shortage, and the Modvat credit wrongly utilized by the respondents made the amount recoverable. The Commissioner (Appeals) erred in setting aside the duty demand based on an incorrect interpretation of the law.

3. Regarding the penalty, the Tribunal noted that the penalty amount of Rs. 25,000 under Rule 173-Q could not be sustained. The penalty should have been imposed under Rule 57(i) for wrongful availment of credit. Therefore, the Commissioner (Appeals) rightly set aside the penalty against the respondents.

4. The Tribunal ultimately set aside the Commissioner (Appeals) order except for the penalty amount, restoring the duty demand confirmed by the adjudicating authority. The amount deposited by the respondents was to be adjusted towards the duty demand. The appeal of the Revenue was disposed of accordingly, with the penalty being set aside and the duty demand being upheld.