2005 (5) TMI 133 - AT - Central Excise

Summary

Issues:
Disallowance of Modvat credit to the company and imposition of penalties on its employees.

Analysis:
The main issue in this case pertains to the disallowance of Modvat credit to the company and the imposition of penalties on its employees. The Modvat credit of Rs. 61,588/- was denied to the company on the basis that the goods received were not accompanied by a Modvatable invoice as required by Rule 57G. The Commissioner (Appeals) found that the goods were not accompanied by the necessary documentation for claiming the credit, and the subsequent invoice did not reference the earlier delivery challan. As a result, the denial of Modvat credit was deemed valid and upheld.

Another contention was raised regarding the penalties imposed on the employees. It was argued that since the Modvat credit was reversed before the issuance of the show cause notice, the penalties should be quashed. However, under Rule 57-I, the imposition of a penalty equal to the wrongfully availed credit is mandatory. The cases cited to support the quashing of penalties were found inapplicable as they were under a different section. Therefore, the penalties imposed on the employees were confirmed as justified.

The judgment also addressed the penalties imposed on the Deputy Manager and Commercial Manager of the company. It was noted that they were managing the company's affairs at the time and had taken the Modvat credit illegally to benefit the company. The penalty amount imposed on them was considered reasonable, and no grounds were found to set it aside.

In conclusion, the impugned order disallowing the Modvat credit and imposing penalties was upheld, and the appeals of the appellants were dismissed.