2007 (7) TMI 137 - AT - Central Excise

Credit utilized on those goods which were not received under duty paying documents Later appellant passed impermissible credit benefit to purchaser Demand and penalty are sustainable Since amount involved is only Rs 2, 04, 621 so penalty of Rs 2 lakh is reduced to 1lakh to meet ends of justice

Summary

Issues:
Manufacture of MS CTD Bars under CETA, 1985 and availing Modvat credit facility under Rule 57A of Central Excise Rules, 1944; Illegal utilization of credit for M.S. Scrap received from unregistered dealers; Confirmation of demand and penalty imposition under Rule 173Q; Applicability of Rule 57F(1)(ii) regarding removal of inputs; Recovery of Modvat credit under Section 11A and Rule 57-I.

Analysis:
The case involves the appellants engaged in manufacturing MS CTD Bars under CETA, 1985 and availing Modvat credit under Rule 57A. The issue pertains to the illegal utilization of credit for M.S. Scrap received from unregistered dealers, leading to a show cause notice for recovery and penalty under Rule 173Q. The adjudicating authority and appellate authority confirmed the demand and penalty, which was challenged in the appeal.

The appellant's advocate argued that the M.S. Scrap received was non-dutiable and hence no duty was payable on clearance, citing the case of Amrit Foods v. CCE, UP. The contention was that the provisions of Rule 57F(1)(ii) applied to their clearances. On the other hand, the ld. SDR contended that the appellant passed on ineligible benefits using Modvat credit, justifying the penalty under Rule 173Q.

Upon considering the submissions, it was noted that the appellants received non-duty paid M.S. Scrap from unregistered dealers and utilized the credit balance in RG-23A Part-II for clearance. The provisions of Rule 57F(1)(ii) were analyzed, indicating that it applied only when duty had been paid by the supplier, which was not the case here. The argument that there was no short payment of duty was countered by invoking Rule 57-I for recovery when credit was wrongly utilized.

The judgment upheld the confirmation of demand, finding that the appellants debited the amount on inputs to pass on the credit balance, even though it was not required. The penalty imposed under Rule 173Q was deemed correct as the appellants willfully utilized the credit for non-duty paid goods, passing on impermissible benefits. The excessive penalty of Rs. 2 lakhs was reduced to Rs. 1 lakh for justice. The impugned order was upheld with modifications regarding the penalty.

In conclusion, the judgment addressed the issues of illegal credit utilization, applicability of relevant rules, recovery of Modvat credit, and penalty imposition under Rule 173Q, providing a detailed analysis and reasoning for the decision.