2002 (2) TMI 187 - AT - Central Excise

Summary

Issues:
1. Challenge against penalty confirmed by Commissioner (Appeals)
2. Challenge against availment of Modvat credit in respect of rejected goods

Analysis:

Issue 1: Challenge against penalty confirmed by Commissioner (Appeals
The appellant, M/s. Para Coat Products Ltd., contested the penalty confirmed by the Commissioner (Appeals) under the impugned order. The appellant argued that they did not include the value of goods received back under Rule 173-H of the Central Excise Rules while declaring the aggregate value of clearance of excisable goods. They voluntarily paid the duty upon realization of the error. The appellant maintained that there was no wilful misdeclaration or suppression to invoke Section 11AC of the Central Excise Act for imposing a penalty equivalent to duty. The appellant also highlighted that the Modvat credit would be availed by the customers of their final products, negating any intention to evade payment of duty. The appellant relied on precedents such as Engineers Combine v. C.C.E., New Delhi and G.S. Marbles (P) Ltd. v. C.C.E., Jaipur-II to support their arguments. The appellant further contended that the penalty imposed was excessive, citing the case of Escorts JCB Ltd. v. C.C.E, New Delhi. The Tribunal reduced the penalty from Rs. 3,71,505 to Rs. 50,000, considering the circumstances and discretion under Section 11A.

Issue 2: Challenge against availment of Modvat credit in respect of rejected goods
The Revenue challenged the availment of Modvat credit in respect of rejected goods. The Commissioner (Appeals) allowed the Modvat credit but directed the Adjudicating Authority to verify if the rejected goods underwent the process of re-manufacture as per the precedent of Hindalco Industries Ltd. v. C.C.E. The penalty imposed on the count of Modvat credit availment was set aside pending verification by the Adjudicating Authority. The Revenue argued that the proviso to Section 11A was invoked in the show cause notice, alleging wilful suppression and misdeclaration by the appellant to evade duty. The Revenue emphasized that the availability of Modvat credit to customers does not absolve the appellant of the duty evasion allegation. The Revenue relied on the decision in Jay Yuhshin Ltd. v. C.C.E., New Delhi to support their stance on the intention to evade payment of duty. The Tribunal agreed with the Revenue's contention and remanded the question of Modvat credit availability and penalty imposition to the Adjudicating Authority for further examination.

In conclusion, the Tribunal upheld the demand of duty against M/s. Para Coat Products Ltd. and reduced the penalty imposed on them. The Tribunal also remanded the issue of Modvat credit availment and penalty imposition back to the Adjudicating Authority for detailed verification and decision.