2000 (3) TMI 82 - AT - Central Excise

Summary

Issues Involved:
1. Unauthorized utilization of Modvat credit.
2. Suppression of facts and extended period of limitation.
3. Imposition of penalty and interest under Rule 57-I(4) and Rule 57-I(5).
4. Role and penalty on the Managing Director.

Detailed Analysis:

1. Unauthorized Utilization of Modvat Credit:
The matter pertains to the unauthorized utilization of Modvat credit amounting to Rs. 22,63,884.75 by M/s. Jay Rapid Rollers Ltd. for inputs used in the re-rubberisation of old and used rollers, which were removed without payment of central excise duty. The Commissioner of Central Excise observed that the appellants did not inform the Department about the use of Modvated inputs in these exempted goods, which was detected during a factory visit by Central Excise Officers on 8-8-1996.

2. Suppression of Facts and Extended Period of Limitation:
The Commissioner found that the appellants had suppressed material facts with the intention to evade payment of central excise duty. The show cause notice issued on 27-11-1997 detailed the grounds for applying the extended period of limitation, stating that the appellants did not disclose the use of duty-paid inputs in the re-rubberisation process. The Tribunal agreed with the adjudicating authority that the extended period of limitation was correctly applicable, as the suppression was established beyond reasonable doubt.

3. Imposition of Penalty and Interest under Rule 57-I(4) and Rule 57-I(5):
The Revenue appealed the Commissioner's decision for not imposing mandatory penalties under Rule 57-I(4) and not demanding interest under Rule 57-I(5). However, Rule 57-I(4) was inserted on 23-7-1996, and the period involved was from 1993-94 to August 1996. The Tribunal held that penalties and interest could not be imposed retrospectively for periods before the rule's enactment, citing precedents such as Brij Mohan v. Commissioner of Income-Tax and Sonia Engg. Works v. CCE.

4. Role and Penalty on the Managing Director:
The Commissioner imposed a penalty of Rs. 2.5 lakh on the Managing Director, Shri Sukhbir Singh, based on his role in the day-to-day affairs of the company and his awareness of the misuse of Modvat credit. However, the Tribunal found no specific role or detailed discussion in the impugned order justifying this penalty. Considering the nature of the dispute, the Tribunal set aside the penalty on the Managing Director, referencing the Supreme Court's observations in related cases.

Conclusion:
The Tribunal confirmed the demand of Rs. 22,63,884.75 but reduced the penalty on M/s. Jay Rapid Rollers Ltd. from Rs. 6 lakh to Rs. 3 lakh. The penalty on the Managing Director was set aside. The appeal by the Revenue regarding penalties and interest under Rule 57-I(4) and Rule 57-I(5) was dismissed, as the provisions were not applicable to the period in question. All three appeals were disposed of accordingly.