2016 (12) TMI 1324 - AT - Central Excise

Reversal of Cenvat credit - Interest - Penalty - Notification No.203/1992-Cus, dt.10.5.1992 - Rule 173Q of erstwhile Central Excise Rules, 1944 - Held that - the Appellant had, at the relevant time, availed the benefit of the notification, without complying the conditions, resulting into contravention of relevant provisions of the Central Excise Rules and rules made there under. Consequently, even though they have paid the entire amount of MODVAT Credit, availed earlier, however, the contravention cannot be obliterated - Appeal partly allowed.

Summary

Issues: Penalty imposition under Rule 173Q of Central Excise Rules, 1944 for availing MODVAT Credit on exported goods.

Analysis:
The appeal was filed against the Order-in-Original (OIA) passed by the Commissioner (Appeals), which imposed a penalty under Rule 173Q of the Central Excise Rules, 1944. The Appellants had availed the benefit of a notification while also claiming MODVAT Credit on inputs used in manufacturing goods for export. Subsequently, they reversed the MODVAT Credit by debiting their PLA account. A demand notice was issued for interest recovery and penalty imposition, which was confirmed by the Commissioner (Appeals), leading to the present appeal.

The Appellant contended that there was confusion regarding the eligibility of MODVAT Credit under the VABAL scheme for exported goods. They argued that upon realizing the error, they promptly paid back the entire MODVAT Credit amount and the interest, albeit with a delay. The Appellant emphasized that there was no intention to wrongly avail the MODVAT Credit, seeking relief from the penalty imposed under Rule 173Q (1).

On the contrary, the Authorized Representative for the Revenue highlighted the delay in interest payment despite the reversal of MODVAT Credit. It was argued that the contravention of relevant provisions due to incorrect benefit availed warranted the penalty imposition.

The Tribunal acknowledged that the Appellants had indeed availed the notification benefit without fulfilling the conditions, leading to a breach of Central Excise Rules. Although the Appellants rectified the error by repaying the MODVAT Credit, the contravention could not be ignored. Considering the circumstances, the Tribunal deemed a penalty of ?5,000 under Rule 173(Q)(1) appropriate for the case, reducing the initial penalty amount. The decision aimed to uphold justice while addressing the violation. Consequently, the penalty was modified to ?5,000, partially allowing the appeal against the original order.