1989 (10) TMI 156 - AT - Central Excise

Summary

Issues:
1. Illegal availing and utilization of Modvat credit by the appellants.
2. Disallowance of credit and imposition of penalty under Rule 173-Q(l)(bb).
3. Interpretation of Rule 57-H regarding transitional provisions.
4. Discrepancy in the facts presented by the appellants regarding the purchase of scrap.
5. Justification of the penalty imposed by the Collector.

Analysis:

The case involves the appellants illegally availing Modvat credit on waste & scrap without proper declaration, leading to a show cause notice alleging fraudulent utilization of the credit. The appellants argued that they had purchased scrap before the clarification on Modvat credit and relied on Rule 57-H(1) for discretion in availing credit. However, the adjudicating authority disallowed the credit and imposed a penalty under Rule 173-Q(l)(bb).

The appellants contended that they applied for further credit on steel melting scrap received in March 1986, which was pending with the Asstt. Collector. The SDR supported the findings of the adjudicating authority, emphasizing the illegality of the credit availed by the appellants.

The Tribunal observed that the appellants' reference to additional credit for scrap in March 1986 was irrelevant to the current issue. The main reliance of the appellants on Rule 57-H was analyzed, noting that the proviso disallowed credit for inputs received after April 1, 1986. The Tribunal found no merit in the appeal based on this provision.

However, a discrepancy in the appellants' statements regarding the purchase of scrap was noted. The Tribunal highlighted that if the scrap was purchased before January 31, 1986, no credit would be allowed as per Rule 57-H(2). The final decision on credit allowance depended on the correct timeline of scrap purchases and declarations made by the appellants.

In conclusion, the Tribunal upheld the penalty imposed by the Collector, emphasizing the seriousness of the appellants' actions in illegally availing and utilizing the Modvat credit. The decision on credit allowance was to be based on the findings regarding the purchase dates of scrap and compliance with declaration requirements under Rule 57-H.