2013 (2) TMI 251 - HC - Central Excise

Penalty - principles of natural justice - appellant submitted that neither the show cause notice nor the adjudication order indicates as to which clause of Rule 173Q of Central Excise Rules was sought to be pressed into service for the purpose of penalising the appellant. - Held that - When the appellant was told in no unequivocal terms that he had irregularly or illegally availed himself of the Modvat Credit benefit, the insistence that the particular clause sought to be invoked should also have been indicated insisting upon an empty formality - no violation of the principles of natural justice. - It cannot be said by any stretch of imagination that the appellant was prejudiced because the particular clause under which he was sought to be penalised was not indicated in the show cause notice. It is now well settled that violation of principles of natural justice simplicitor is not enough. One has to show the consequent prejudice suffered by him. It is not the case of Mr.Lahiri that if this clause had been indicated his client would have been in a better position to defend his case. Nor is it his case that his client was misled or could not know or did not know the charge he had to meet. - Decided against assessee.

Summary

Issues:
1. Entitlement to Modvat Credit.
2. Authority of law regarding penalty imposition under Rule 173Q of Central Excise Rules.

Analysis:
1. Entitlement to Modvat Credit:
The appellant contended that they had purchased Benzene and Toluene, which should have entitled them to Modvat Credit. However, the Tribunal found that the goods purchased were special boiling point spirits classified under Central Excise Classification Nos. 2710.11 and 2710.13, which were excluded from Modvat benefit under Notification No.5/94. The Court upheld this finding, noting that the appellant's own declaration did not mention purchasing Benzene or Toluene for claiming Modvat Credit. Therefore, the appellant was not eligible for the credit as per the notification's provisions.

2. Authority of Law for Penalty Imposition:
The appellant argued that the penalty imposed lacked authority as the show cause notice did not specify the particular clause of Rule 173Q of the Central Excise Rules allegedly contravened. In response, the Court distinguished a previous judgment and held that the show cause notice adequately informed the appellant of the irregular Modvat Credit availed and the penalty sought. The Court deemed the insistence on specifying the exact clause as an empty formality, stating that the appellant was not prejudiced by its absence. The Court emphasized that mere violation of natural justice principles was insufficient unless consequential prejudice was demonstrated, which was not the case here. Consequently, the penalty imposition was deemed lawful, and the appeal was dismissed.

In conclusion, the Court upheld the Tribunal's decision, denying the appellant's entitlement to Modvat Credit and affirming the authority of law regarding penalty imposition under Rule 173Q of the Central Excise Rules. The appellant's arguments were found to lack merit, and the appeal was dismissed, with the interim order vacated. Additionally, the Court allowed the department to encash the bank guarantee and refund the balance to the appellant, with each party bearing their own costs.