1989 (3) TMI 261 - AT - Central Excise

Summary

Issues:
1. Reversal of MODVAT credit and imposition of personal penalty by Collector of Central Excise.
2. Eligibility of appellants for deemed MODVAT credit on steel scrap prior to filing declaration under Rule 57G.
3. Time-barred nature of Show Cause Notice and imposition of personal penalty.
4. Interpretation of Rules 57G and 57H regarding availing of MODVAT credit and transitional provisions.

Analysis:
1. The appeal challenged the Collector's order reversing MODVAT credit of Rs. 9,39,540.66 and imposing a personal penalty of Rs. 5,000 under Rule 57I. The Collector found the appellants irregularly availed deemed MODVAT credit on steel scrap used in manufacturing. The issue involved the legality of the Collector's decision.

2. The appellants, a mini steel plant, filed a declaration under Rule 57G to avail MODVAT credit on steel scrap. The Department alleged unauthorized credit availed on scrap received before the declaration date. The appellants argued they were entitled to deemed credit based on a government direction. However, the Tribunal held that credit could only be taken after filing the declaration under Rule 57G.

3. The appellants contended the Show Cause Notice was time-barred as it was issued beyond six months. The Department argued it was within the time limit and cited suppression of facts to justify a longer recovery period. The Tribunal found the Notice timely but set aside the personal penalty due to lack of mala fides.

4. The Tribunal analyzed Rules 57G and 57H to determine credit eligibility. Rule 57G required filing a declaration to avail MODVAT credit, with deemed credit allowed only after obtaining acknowledgment. The Tribunal clarified that deemed credit could only be taken post-declaration. Rule 57H's transitional provisions did not extend credit beyond specific dates. The Tribunal upheld the Collector's order with modifications, emphasizing compliance with procedural requirements for credit availing.