2001 (1) TMI 160 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit
2. Imposition of penalty

Analysis:
Issue 1: Disallowance of Modvat credit
The case involves the disallowance of Modvat credit amounting to Rs. 3,69,27,513.04 due to alleged non-compliance with Rule 57H of the Central Excise Rules, 1944. The appellants, engaged in manufacturing Digital Electronic Exchange Equipment, availed Modvat credit on duty paid inputs. The Department contended that the credit availed was not legally admissible as the appellants did not follow the provisions of Rule 57H. The Commissioner disallowed the Modvat credit, citing irregularities in the filing of declarations and accounting practices. The appellants argued compliance with Rule 57G, maintaining transparent accounting systems, and contended that Rule 57H was not applicable to their case. The Counsel highlighted that credit was taken only after filing the declaration and cited relevant case laws to support their stance.

Issue 2: Imposition of penalty
In addition to disallowing the Modvat credit, a penalty of Rs. 10 lakhs was imposed on the appellant. The Department alleged suppression of vital facts by the appellants to wrongly avail Modvat credit, leading to the imposition of the penalty. The Counsel for the appellant argued that as a Public-sector Undertaking, there was no intention to irregularly avail Modvat credit, and all relevant documents were submitted to the Department in a timely manner. They cited precedents to support their argument that Modvat credit was rightfully taken. The Department, represented by the SDR, maintained that the provisions of Rule 57H were applicable to the case, and the extended period for recovery was justified due to misstatements and suppression of facts.

Judgment:
After hearing both sides, the Tribunal noted that crucial declarations filed by the appellants in 1986 were not presented during the adjudication, leading to a remand for further examination. The Tribunal deemed the declarations as essential evidence and allowed their admission at the appellate stage. The case was remanded to the Ld. Commissioner for a detailed review, including the declarations and the limitation aspect. The Commissioner was directed to consider the evidence, including the declarations, and provide the appellants with an opportunity to be heard in person. The appeal was allowed by way of remand, leaving the issue of limitation open for further consideration.