1997 (4) TMI 94 - HC - Central Excise

Summary

Issues:
1. Validity of the decision of the respondent-CEGAT in allowing the appeal of the Revenue and levying penalty and duty for wrongly availed Modvat credit.
2. Interpretation of Section 11A of the Central Excise Act regarding the period of limitation for evasion of duty.
3. Consideration of alternative remedy under Section 35G of the Act in challenging the Tribunal's order.

Detailed Analysis:
1. The petitioner challenged the decision of the respondent-CEGAT regarding the Modvat credit issue. The petitioner had two units, and they transferred raw materials from Unit 2 to Unit 1 under the Modvat scheme. The Collector initially denied permission for this transfer, citing Rule 57F(i). Subsequently, a show cause notice was issued for levying penalty and duty on the transferred inputs. The Collector upheld the demand for one period but found the demand for the second period barred by limitation. The Tribunal, however, held that there was suppression by the petitioner, allowing the demand for the second period. The Court disagreed with the Tribunal's conclusion, stating that the petitioner's letter of 18-11-1986 was a full disclosure, and there was no suppression. The Tribunal's order was found to be illogical, and the Court set it aside.

2. The interpretation of Section 11A of the Central Excise Act was crucial in determining the period of limitation for evasion of duty. The Collector found that since the petitioner had informed the authorities about the transfer of inputs from Unit 2 to Unit 1, there was no suppression, and the limitation period had expired. However, the Tribunal disagreed, holding that there was suppression and allowed the demand for the second period. The Court, after a detailed analysis, concluded that there was no suppression, and the Tribunal's order was erroneous. The Court emphasized that the power under Section 11A could not be invoked without suppression, which was absent in this case.

3. The issue of the alternative remedy under Section 35G of the Act was raised by the Standing Counsel for the Central Government. The Counsel argued that the petitioner should have sought a reference to the Court instead of filing a writ petition. However, the Court noted that the Tribunal's order was flawed due to a logical error, making the order itself bad. Therefore, the Court allowed the writ petition and set aside the Tribunal's order. The Court did not award any costs in this matter.

In conclusion, the Court's judgment focused on the lack of suppression by the petitioner, the correct interpretation of Section 11A regarding the limitation period, and the availability of an alternative remedy under Section 35G in challenging the Tribunal's order. The Court ultimately set aside the Tribunal's decision, emphasizing the importance of a logical and reasonable process in reaching legal conclusions.