2002 (4) TMI 183 - AT - Central Excise

Summary

Issues Involved:
1. Legality of the disallowance of credit of AED taken after the prescribed period of six months.
2. Validity of the show cause notice issued to the assessee.
3. Appropriateness of the penalty imposed on the assessee.

Issue-wise Detailed Analysis:

1. Legality of the disallowance of credit of AED taken after the prescribed period of six months:

The Tribunal examined whether the assessee was entitled to take credit of Additional Excise Duty (AED) after the expiry of six months from the date of issuance of the invoices, as per Rule 57G of the Central Excise Rules. The assessee argued that they had taken credit of Basic Excise Duty (BED) within the prescribed time and that the delay in taking AED credit was due to a clerical error. However, the Tribunal held that AED and BED are distinct duties, and credit for each must be taken independently within the specified period. The Tribunal emphasized that no officer has the authority to condone the delay in taking credit beyond the six-month period stipulated by Rule 57G. Therefore, the Tribunal concluded that the assessee's claim to take AED credit after the expiry of six months was not permissible under the law.

2. Validity of the show cause notice issued to the assessee:

The assessee contended that the show cause notice was defective and invalid because it did not explicitly state that the credit was to be disallowed or canceled but instead mentioned recovery of the credit amount. The Tribunal, however, found that the show cause notice detailed all relevant facts and circumstances, informing the assessee of the irregularity in taking the credit. The Tribunal referred to the principle that a show cause notice should not be invalidated due to improper wording if the intention behind it is clear. The Tribunal cited the Supreme Court's observation in C.C.E., Calcutta v. Pradyumna Steel Ltd. that mentioning a wrong provision of law does not invalidate a show cause notice. Therefore, the Tribunal held that the show cause notice was valid and served the purpose of informing the assessee about the disallowance of the credit.

3. Appropriateness of the penalty imposed on the assessee:

The Tribunal addressed the issue of the penalty imposed on the assessee by the adjudicating authority. The Commissioner (Appeals) had quashed the penalty of Rs. 1,00,000/- imposed by the adjudicating authority, but the Revenue sought enhancement of the penalty amount. The Tribunal noted that the assessee had taken Modvat credit in contravention of Rule 57G and had not shown willingness to reverse the credit despite requests from the department. The Tribunal found that the assessee's conduct did not reflect bona fide behavior and warranted the imposition of a penalty. However, considering the non-utilization of the Modvat credit amount, the Tribunal decided not to enhance the penalty but restored the original penalty of Rs. 1,00,000/- imposed by the adjudicating authority.

Conclusion:

In conclusion, the Tribunal dismissed the appeal of the assessee (Appeal No. E/2542/2001-NB) and upheld the disallowance of the AED credit taken after the prescribed period. The Tribunal also validated the show cause notice issued to the assessee. Additionally, the Tribunal allowed the appeal of the Revenue (Appeal No. E/2135/2001-NB) by restoring the penalty of Rs. 1,00,000/- imposed by the adjudicating authority on the assessee.