2002 (1) TMI 213 - AT - Central Excise

Modvat/Cenvat - Suppression of facts - Mandatory penalty - Accountal of goods - Modvat on inputs

Summary

Issues:
1. Confiscation of goods under Rule 173Q and redemption fine.
2. Confirmation of demand for irregular Modvat credit under Rule 57-I.
3. Imposition of penalties under Rule 57-I(4), Rules 173Q, and 226.
4. Discrepancies in accounting for inputs and manufacture of radiators.
5. Applicability of penalty provisions under different rules.

Analysis:
The appeal was filed against the impugned order-in-appeal confirming the confiscation of goods under Rule 173Q with a redemption fine of Rs. 50,000 and demand confirmation of Rs. 10,16,863 for irregular Modvat credit under Rule 57-I. The Additional Commissioner had also imposed penalties under Rule 57-I(4), Rules 173Q, and 226 on the appellants. The appellants contested the show cause notice, claiming that excess radiators were received back for repairs and inputs were utilized for radiator manufacture but not accounted for due to an ill official. The Counsel argued that penalties were wrongly imposed and the impugned order needed modification or set aside.

The Tribunal noted that the penalty under Rule 57-I(4) for failure to account for inputs was not applicable as there was no allegation of fraud or misrepresentation. The appropriate clause, Rule 57-I(2), required payment of duty on unaccounted inputs without prescribing a penalty. Thus, the penalty under Rule 57-I(4) was set aside. Regarding penalties under Rules 173Q and 226, the Tribunal found Rule 173Q inapplicable due to lack of evidence of intent to clear goods without duty payment. However, a penalty under Rule 226 was upheld for unexplained excess radiators.

The evidence showed no irregular utilization of inputs for radiator manufacture, leading to disallowance of Modvat credit for March 1999 but not for February 1999. The impugned order was modified, setting aside duty demand for February 1999 and confirming it for March 1999. Consequently, the appeal was disposed of with applicable relief under the law.