1994 (4) TMI 159 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty on M/s. Tata Engineering & Locomotive Co. Limited for utilizing Modvat Credit improperly.
2. Alleged contravention of Notification 176/86 and non-observance of Central Excise formalities.
3. Dispute regarding payment of duty on forgings transferred to Pune factory.
4. Argument of Appellants regarding bona fide conduct and lack of revenue loss.
5. Department's contention on the irregularity in duty payment and penalty imposition.

Analysis:
1. The Appellants, M/s. Tata Engineering & Locomotive Co. Limited, filed an appeal against the penalty imposed by the Collector of Central Excise, Patna, for utilizing Modvat Credit improperly in the manufacture of steel forgings. The penalty was imposed due to the Appellants transferring forgings to their Pune factory without paying duty at the time of removal from their Jamshedpur factory, as required by Central Excise Rules.

2. The Appellants argued that the irregularity occurred during the initial stages of the Modvat Scheme and that they had sought permission from the Government to transfer forgings without duty payment. They highlighted subsequent amendments to Notification 217/86, which would have allowed such transfers subject to certain provisions. The Appellants contended that there was no revenue loss as they had paid the duty later, resulting in a gain for the Government instead. They emphasized their bona fide intentions and requested the penalty to be set aside.

3. The Departmental Representative countered the Appellants' arguments by pointing out the delay in duty payment, which was paid in December 1986 despite falling due between March and December 1986. The Department argued that the penalty imposed was lenient considering the duty amount involved, which exceeded Rs. 14 lakhs. They supported upholding the penalty and dismissing the appeal.

4. Upon reviewing the contentions and records, the Tribunal found that the Collector had shown leniency in imposing the penalty but deemed it unnecessary due to the Appellants' lack of availing Modvat Credit by not paying duty initially. The Tribunal concluded that the Appellants' conduct was bona fide, and there was no loss of duty eventually. As the duty paid without availing Modvat Credit exceeded the penalty amount, the Tribunal set aside the penalty and allowed the appeal.

This judgment highlights the importance of compliance with excise rules, the significance of timely duty payment, and the consideration of bona fide conduct in penalty imposition cases.