2004 (5) TMI 223 - AT - Central Excise

Summary

Issues Involved: Appeal challenging penalty and interest set aside by Commissioner (Appeals) while confirming duty demand.

Summary:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the Revenue challenging the part of the order-in-appeal where the penalty and interest imposed by the adjudicating authority were set aside by the Commissioner (Appeals) while confirming the duty demand against the respondents. The respondents, manufacturers of man-made yarn, availed Modvat credit facility under Rule 57A and cleared yarn without payment of duty to a cooperative society. The adjudicating authority confirmed duty demand, penalty, and interest, which was later set aside by the Commissioner (Appeals) based on the grounds that duty was deposited before the show cause notice was issued.

The main issue for consideration was whether the penalty and interest could be set aside solely because the duty was deposited before the issuance of the show cause notice. The respondents cited various judgments to support their position, arguing that no penalty should be imposed if duty is voluntarily paid before the notice. However, the Tribunal found that the circumstances of this case were different as the respondents did not voluntarily pay the duty but only deposited it after being caught by the Department for non-compliance with exemption notification conditions. It was noted that the respondents breached mandatory conditions with intent to evade duty, indicating wrongful gain and loss of revenue to the Government.

Therefore, the Tribunal held that the penalty and interest should not have been quashed by the Commissioner (Appeals) considering the conduct of the respondents. The impugned order was set aside, and the original order imposing penalty and interest was restored, albeit with a reduced penalty of Rs. 10,000 and interest payable by the respondents. The appeal of the Revenue was accepted based on these terms.