2004 (2) TMI 262 - AT - Central Excise

Summary

Issues:
Imposition of penalty for taking credit of Modvat in respect of capital goods before installation.

Analysis:
The appeal was against an order imposing a penalty of Rs. 3.50 lakhs on the appellants for taking credit of Modvat in respect of capital goods before their installation in the factory. The capital goods were received by the appellants, and the credit was taken before installation, leading to the penalty. The appellants admitted the error and reversed the credit immediately upon realization, even before the issuance of a show cause notice. However, the Department still issued a show cause notice and imposed the penalty. The appellants argued that since they rectified the mistake voluntarily, the penalty was unwarranted. They cited a judgment in a similar case to support their plea.

Upon hearing both sides, the tribunal noted that although the appellants raised the credit in their books, there was no evidence of any utilization of the credit for duty payment. As there was no actual loss to the revenue and no deliberate intention to evade duty, the mere act of raising the credit entry was not a serious offense. The tribunal emphasized that the absence of any allegation that the duty payment would have been improper without the credit entry was crucial. Therefore, the tribunal concluded that the penalty was unjustified and ruled in favor of the appellants.

In light of the above analysis, the tribunal allowed the appeal and set aside the order of the Commissioner imposing the penalty. The tribunal found that since there was no deliberate intention to evade duty and no actual loss to the revenue, the penalty for the premature credit entry of Modvat in respect of capital goods before installation was not justified.