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2014 (11) TMI 745 - HC - Central ExciseReversal of MODVAT Credit - Penalty u/s 11AC - Interest u/s 11AB - Whether the lower appellate authority was right in setting aside the mandatory penalty under Rule 57-I(4) of the Central Excise Rules 1944 and Section 11AC of the Central Excise Act 1944 for the entire period subsequent to 28-9-1996 - Held that - Department has contested the matter regarding imposition of penalty prior to the date of introduction of the said provision viz. 57-I(4) of the Central Excise Rules 1944 and thereafter. Therefore the Revenue having raised such a ground before the Tribunal the Tribunal ought to have considered the issue and rendered a finding. Without doing so the Tribunal merely observed that they need not interfere with the decision of the lower appellate authority as regards the penalty for the brief period from 23-7-1996 to 28-9-1996 when the contention of the Department that post 28-9-1996 also the Department was entitled to levy penalty and that the period covered for adjudication was from 1-4-1994 to 30-9-1998. Hence this question requires consideration of the Tribunal. - Matter remanded back - Decided in favour of Revenue.
Issues:
1. Imposition of mandatory penalty under Rule 57-I(4) and Section 11AC for the entire period subsequent to 28-9-1996. 2. Setting aside the appeal filed by the Department when the entire duty demanded has been paid by the first respondent. Analysis: Issue 1: Imposition of mandatory penalty under Rule 57-I(4) and Section 11AC for the entire period subsequent to 28-9-1996: The case involved the respondent/assessee being issued a show cause notice demanding duty for not reversing Modvat credit availed on inputs cleared without payment of duty. The Adjudicating Authority confirmed the demand, imposed penalties under Rule 57-I(4) and Section 11AC, and Rule 173Q of the Central Excise Rules, 1944. The Commissioner (Appeals) remanded the matter to re-examine the claim and held that Rule 57-I(4) applies only in cases of fraud, wilful misstatement, etc. The Appellate Authority vacated the penalties imposed, leading to the Revenue's appeal to the Tribunal. The Tribunal dismissed the appeal, stating that the penal provision under Rule 57-I(4) had prospective effect from 23-7-1996, not 28-9-1996, and declined to interfere with the lower appellate authority's decision for the period in question. The High Court remitted the matter back to the Tribunal to consider the levy of penalty post 23-7-1996. Issue 2: Setting aside the appeal filed by the Department when the entire duty demanded has been paid by the first respondent: The Appellate Authority set aside the penalties imposed by the Adjudicating Authority, leading to the Revenue's appeal to the Tribunal. The Tribunal dismissed the appeal, stating that the penal provision under Rule 57-I(4) had prospective effect from 23-7-1996, not 28-9-1996, and declined to interfere with the lower appellate authority's decision for the period in question. The High Court remitted the matter back to the Tribunal to consider the levy of penalty post 23-7-1996. In conclusion, the High Court remitted the matter back to the Tribunal to consider the levy of penalty under Rule 57-I(4) for the period post 23-7-1996, emphasizing the need for a detailed examination of the issue.
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