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2017 (7) TMI 94 - HC - Central ExciseMODVAT credit - wrong availment of credit - tin plates having thickness of more than 0.26 mm - it is the case of petitioner that in the absence of any independent finding that these inputs were found to be of thickness exceeding 0.24 mm. the demand made in respect of this amount is not sustainable - Held that - As per Rule 173G it was incumbent on the part of respondent no.1 to maintain accounts of production manufacture storage delivery or disposal of goods including the material received for or consumed in the manufacture of excisable or other goods. The purpose of maintaining the accounts of raw material was obviously for checking of evasion of excise duty. Respondent no.1 was required to follow the procedure prescribed in the Rule for maintaining the accounts. The thickness of the tin plates seems to have been deliberately kept ambiguous in Anx. B2 . However from Column No.5 of Anx.B2 it is clear that the tin plates having thickness ranging from 0.30 mm. to 0.49 mm. also were purchased by respondent no.1. It was therefore necessary for respondent no.1 to specifically classify and state the quantity of the tin plates which were having thickness below 0.24 mm. as well as above 0.24 mm. The petitioner has rightly held that respondent no.1 has deliberately suppressed the said information. If that be so respondent no.1 cannot be allowed to take benefit of its own wrong and it will have to be held that the tin plates described in Anx. B2 were of thickness above 0.24 mm. and were not used by respondent no.1 for manufacturing oval tin cans. Penalty - Rule 173Q of the Rules - Held that - respondent no.1 has obtained MODVAT credit wrongly in the sum of 14, 50, 994/plus 23, 87, 575/having total of 38, 38, 569/. Consequently in view of this Rule respondent no.1 was liable to pay penalty as contemplated under this Rule. Petition allowed - decided partly in favor of petitioner.
Issues Involved:
1. Legality and correctness of the Tribunal's order regarding MODVAT credit disallowance. 2. Imposition of penalties on respondent no.1 and respondent nos.2 to 4. 3. Maintainability of the Writ Petition. 4. Limitation period for demanding refund of MODVAT credit. Issue-wise Detailed Analysis: 1. Legality and Correctness of the Tribunal's Order Regarding MODVAT Credit Disallowance: The petitioner challenged the Tribunal's order that quashed the disallowance of MODVAT credit amounting to ?23,87,575 and the imposition of a ?50,00,000 penalty on respondent no.1. The Tribunal confirmed the MODVAT credit disallowance of ?17,86,655 but set aside the disallowance for ?23,87,575, stating that the description of tin plates could cover inputs below 0.24 mm in thickness. The High Court found that the Tribunal ignored the statements of key witnesses recorded under Section 14(2) of the Central Excise Act, which indicated that respondent no.1 availed MODVAT credit on tin plates not used in manufacturing oval tin cans. The High Court held that the petitioner rightly disallowed the MODVAT credit of ?38,38,569 in total and directed respondent no.1 to repay this amount. 2. Imposition of Penalties on Respondent No.1 and Respondent Nos.2 to 4: The High Court found that respondent no.1 was liable for a penalty under Rule 173Q of the Central Excise Rules for wrongly availing MODVAT credit. The Tribunal had set aside the penalty on respondent no.1 on the grounds of wrong rule citation in the show-cause notice. However, the High Court cited precedents indicating that wrong mention of a rule does not invalidate the exercise of power if the correct rule applies. The High Court reduced the penalty from ?50,00,000 to ?38,38,569, equivalent to the wrongly availed MODVAT credit. As for respondent nos.2 to 4, the High Court agreed with the Tribunal that they should not be penalized since the substitution of inputs occurred at the job worker’s end in Mumbai, not at Aurangabad where they managed the company’s affairs. 3. Maintainability of the Writ Petition: The respondents argued that the Writ Petition was not maintainable due to the availability of an alternative remedy. However, the High Court referenced a judgment from the Hon'ble Apex Court in L. Chandrakumar Vs. Union of India, which held that Tribunal judgments are subject to judicial review under Articles 226 and 227 of the Constitution of India. Therefore, the High Court concluded that the Writ Petition was maintainable. 4. Limitation Period for Demanding Refund of MODVAT Credit: The Tribunal held that respondent no.1 did not disclose vital information regarding the specifications of tin plates, leading the department to believe that the MODVAT credit was availed correctly. The High Court upheld the Tribunal's finding that the demand for refund of wrongly availed MODVAT credit was within the limitation period as per the proviso to Section 11A of the Central Excise Act. The respondents did not challenge this finding, making it final. Conclusion: The High Court partly allowed the Writ Petition, directing respondent no.1 to repay ?38,38,569 towards wrongly availed MODVAT credit and an equal amount as a penalty, totaling ?76,77,138, within three months, failing which interest at 10% per annum would apply. The High Court upheld the Tribunal's decision to set aside penalties on respondent nos.2 to 4. The High Court ensured that any amount previously repaid by respondent no.1 would be adjusted against the total amount ordered for repayment.
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