2005 (3) TMI 331 - AT - Central Excise

Summary

Issues:
Imposition of penalty for failure to debit Modvat credit on exempted goods at the time of clearance.

Analysis:
The case involved the appellants manufacturing both dutiable and exempted goods using common inputs. It was discovered during a visit by preventive officers that the appellants had cleared exempted goods without debiting the Modvat credit taken on inputs, amounting to Rs. 3,06,574, which was then used for clearing dutiable goods. The department initiated adjudication proceedings for penalty imposition. The Commissioner (Appeals) upheld the penalty on the company but reduced it for the General Manager. The appellant's advocate argued that since duty was paid before the show cause notice, no penalty should be imposed, citing a Tribunal decision in a similar case.

The department's representative contended that despite the credit being debited later, the clear intention to evade duty payment was evident as the appellants knowingly failed to debit the credit on exempted goods but used it for dutiable goods. This intentional act justified penalty imposition, as per the department's representative, who referred to relevant Tribunal decisions supporting this stance. After considering both arguments, the Member found that the appellants indeed failed to debit the credit on exempted goods at clearance and utilized it for dutiable goods, demonstrating a clear intention to evade duty payment. Consequently, a penalty was imposed on the company, albeit reduced to Rs. 50,000 due to the amount being deposited before the show cause notice. However, no penalty was upheld for the General Manager, setting aside the penalty imposed on him with consequential relief.

In conclusion, the Tribunal upheld the penalty imposition on the company for failing to debit Modvat credit on exempted goods at the time of clearance, citing the clear intention to evade duty payment. The penalty amount was reduced due to the amount being deposited before the show cause notice. The penalty on the General Manager was set aside, providing consequential relief.