2010 (6) TMI 370 - AT - Central Excise

Penalty SSI exemption crossed - demand of duty confirmed by the original authority and upheld by the first appellate authority for the period 1995-96 and 1996-97 - show-cause notice was issued on 6-7-1998 beyond the normal period of limitation - larger period of limitation on the ground of suppression of production and sale of the excisable goods by the respondent with intent to evade payment of duty - appellate authority affirmed the demand of duty but set aside the penalty after noting that Section 11 AC was not applicable to any period prior to 28-9-1996 - Revenue, the only ground raised by the appellant is that, as the offence was committed by the party during the year 1996-97, Section 11AC is applicable - provision mandates that, where the statutory requirements of such a penalty are established, it should be imposed to an extent equal to the amount of duty - no case for imposing a penalty under Section 11AC on the respondent has been made out by the Revenue - no prayer in this appeal of the Revenue for imposing a penalty on the respondent under Rule 173Q Appeal rejected

Issues:
1. Applicability of penalty under Section 11AC of the Central Excise Act.
2. Entitlement to MODVAT credit.
3. Invocation of Rule 173Q of Central Excise Rules, 1944.
4. Breach of provisions of Central Excise Act and Rules.

Analysis:

1. Applicability of penalty under Section 11AC:
The appeal concerns the imposition of a penalty under Section 11AC of the Central Excise Act on the respondent for allegedly crossing the prescribed maximum exemption limit after 28-9-1996. The Revenue contends that the penalty should be imposed based on the grounds of suppression of production and sale of excisable goods by the respondent with the intent to evade duty payment. However, it is noted that the notice invoking Section 11AC was issued beyond the normal period of limitation. The original authority demanded duty and imposed an equal penalty, which was later set aside by the appellate authority. The Revenue's appeal focuses on the applicability of Section 11AC to the offense committed in 1996-97. The appellant's uncertainty regarding the date of the offense and failure to establish the quantum of duty for the relevant period result in the dismissal of the appeal.

2. Entitlement to MODVAT credit:
The respondent sought MODVAT credit to neutralize the demand of duty, but the learned JDR argued that the respondent, by not obtaining registration with the department or following Central Excise procedures, including filing MODVAT declaration, is not entitled to such benefit. Both authorities found that the respondent breached Central Excise provisions by clearing excisable goods beyond the prescribed limit without registration or compliance with procedures, indicating an intention to evade duty. Consequently, the belated request for MODVAT credit is deemed inadmissible.

3. Invocation of Rule 173Q:
The notice also invoked Rule 173Q of the Central Excise Rules, 1944, based on alleged contraventions of rules by the respondent. However, the appellate authority did not find grounds for imposing a penalty under Rule 173Q, and the Revenue did not pray for such a penalty in the appeal. As a result, the appeal cannot succeed on this ground.

4. Breach of provisions of Central Excise Act and Rules:
Both lower authorities concurred that the respondent breached various provisions of the Central Excise Act and Rules by exceeding the prescribed limit without registration or adherence to mandatory procedures. The respondent's failure to intend to pay duty and non-compliance with Central Excise procedures, including MODVAT declaration, further solidified the findings of breach. Consequently, both the appeal and cross-objection were dismissed, affirming the earlier decisions on the matter.

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