2001 (6) TMI 112 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 173Q and Rule 209 of the Central Excise Rules.
2. Interpretation of Rule 57-I regarding recovery of wrong credit by a dealer.
3. Lack of clarity in show cause notice regarding the application of Rule 173Q and Rule 209.
4. Allegation of taking credit on original copies of invoices instead of duplicate copies.
5. Link between penalty imposition and duty confirmation for the extended period.
6. Delay in assessment and show cause notice issuance affecting the justification of penalty imposition.

Analysis:

1. The case involved the imposition of penalties under Rule 173Q and Rule 209 of the Central Excise Rules on a limited company registered as a dealer. The Asstt. Commissioner imposed penalties under both rules, but the penalty under Rule 209 was set aside by the Commissioner (Appeals), while the penalty under Rule 173Q was maintained, leading to the appeal.

2. The interpretation of Rule 57-I was crucial in this case regarding the recovery of wrong credit by a dealer. The rule did not explicitly cover dealers registered under Rule 57GG, creating a loophole where a dealer could pass on wrongly taken credit to a manufacturer without resulting in a demand being made on the dealer, showcasing a flaw in the rule's design.

3. The lack of clarity in the show cause notice regarding the application of Rule 173Q and Rule 209 raised questions about which clauses of the rules applied. The notice did not specify the applicable clause, and the sub-clause (bb) concerning taking credit of duty not permissible under the rules was highlighted for potential application.

4. An allegation was made that the dealer took credit on original copies of invoices instead of the required duplicate copies. The dealer claimed that they did not have the duplicate copies, but as per the rules, credit was to be taken only on duplicate copies appended to monthly returns, indicating a pre-meditated action by the dealer.

5. The judgment referenced by the appellant's counsel linked penalty imposition under the rules with the confirmation of duty for the extended period. However, in cases where recovery was not alleged, the relevance of the judgment was questioned. It emphasized that misrepresentation by the assessee should be observable by officers during routine checks to justify penalty imposition.

6. The delay in assessment and show cause notice issuance by the department played a significant role in the decision. The tribunal found that the department's lethargy in timely assessment or notice issuance affected the justification for imposing penalties on the dealer, leading to the orders being set aside and the appeal being allowed.