1992 (5) TMI 121 - AT - Central Excise

Summary

Issues:
1. Recovery of Modvat credit wrongly taken.
2. Penal action under Rule 173Q of the Central Excise Rules, 1944.
3. Compliance with Modvat scheme.
4. Imposition of a personal penalty.

Analysis:
The appellants, engaged in manufacturing motor vehicle parts falling under sub-heading 8714.00 of the Central Excise Tariff Act, 1985, were issued a notice to show cause why Modvat credit of Rs. 32,517.45 wrongly taken should not be recovered under Rule 57-I of the Central Excise Rules, 1944, and why penal action should not be taken under Rule 173Q for contravention of Rules 57A, 57F, and 57G. The Additional Collector, in an order dated 4-1-1991, found the demand for duty unsustainable due to substantive compliance with the Modvat scheme but imposed a personal penalty of Rs. 20,000 for rule contraventions.

The appellants argued that the credit was entered in the register based on supplier challans before actual receipt of goods, but utilization occurred only post-receipt and after fulfilling duty payment requirements. They contended that any violation was technical, as confirmed by the Additional Collector's acknowledgment of substantive compliance with Modvat provisions. The penalty was challenged on the grounds of non-confirmation of the demand and technical nature of the violation.

Upon reviewing the case record and submissions, it was noted that while the charge was for premature credit entries in the register, subsequent receipt of goods and duty documents aligned with the Modvat scheme requirements. The adjudicating authority recognized the absence of misutilization and deemed the demand unsustainable, affirming substantive Modvat compliance by the appellants.

Considering the finding of substantive Modvat compliance and absence of recoverable duty, the tribunal concurred with the appellants' counsel that any offense was technical. Citing a Supreme Court precedent (M/s. Hindustan Steel Ltd. v. State of Orissa), the tribunal concluded that no penalty should have been imposed. Consequently, the penalty on the appellants was set aside, and the appeal was allowed.