2005 (6) TMI 65 - AT - Central Excise

Summary

Issues:
Appeal for enhancement of penalty and imposition of interest against respondents for wrongful availment of Modvat credit.

Analysis:
The appeal before the Appellate Tribunal CESTAT, NEW DELHI involved the revenue seeking enhancement of penalty and imposition of interest against the respondents for wrongfully availing Modvat credit. The Commissioner (Appeals) had earlier imposed a penalty of Rs. 5,000 on the respondents for availing Modvat credit of Rs. 1,15,525 twice against the same Bill of Entry. The issue at hand was whether the penalty and interest could be confirmed against the respondents even though the duty was paid before the issuance of Show Cause Notice (SCN).

The representative for the respondent argued that since the duty was paid before the SCN, neither penalty nor interest could be confirmed. However, the Tribunal held that this case did not fall under Section 11A for short payment or non-payment of duty but under Rule 57-I for wrongful availment of Modvat credit. The Tribunal emphasized that the provisions of Rule 57-I were mandatory, imposing a penalty equal to the wrongfully availed credit and interest, regardless of the credit reversal before the SCN. The Tribunal distinguished this case from previous judgments, emphasizing that the provisions of Rule 57-I governed the imposition of penalty and interest in this scenario.

Considering the amount of credit wrongly availed, the Tribunal found the penalty of Rs. 5,000 imposed by the Commissioner (Appeals) to be inadequate and disproportionate. Therefore, the penalty was enhanced to Rs. 50,000. Additionally, the demand for interest against the respondents was confirmed, holding them liable to pay interest as per the law. The impugned order was modified accordingly, confirming the penalty enhancement and interest demand. The appeal of the revenue was thus disposed of by the Tribunal, emphasizing the mandatory nature of Rule 57-I in cases of wrongful availment of credits.

In conclusion, the Tribunal's judgment highlighted the strict application of Rule 57-I for penalties and interest in cases of wrongful availment of credits, emphasizing the mandatory nature of the provisions and rejecting the argument that reversal of credit before the SCN absolved the liability. The Tribunal's decision to enhance the penalty and confirm interest underscored the importance of compliance with the specific rules governing such cases, irrespective of procedural errors in the SCN citation.