1993 (11) TMI 152 - AT - Central Excise

Summary

Issues:
1. Condonation of delay in filing reference application.
2. Denial of modvat credit by lower authorities.
3. Questions framed by the Revenue regarding the extension of MODVAT credit.
4. Questions framed in the cross-objection regarding the imposition of penalty.
5. Compliance with the provisions of Rule 57G in utilizing inputs against final products.
6. Imposition of penalty for violation of Modvat Rules.

Analysis:
1. The Tribunal condoned the delay of 8 days in filing the reference application by the Revenue and proceeded to consider the application on merits after hearing both sides.

2. The reference application pertained to a previous order where the respondents were allowed modvat credit despite lower authorities seeking to deny it due to violations of Modvat Rules. A penalty of Rs. 5 lakhs was sustained for deliberate violations observed by the Tribunal.

3. The Revenue framed questions regarding the extension of MODVAT credit on inputs without compliance with specific provisions of Modvat Rules. The Tribunal emphasized the necessity of compliance with Rule 57G for declaring inputs against final products to ascertain modvat credit eligibility.

4. The cross-objection raised questions on the imposition of a penalty of Rs. 5 lakhs on the company and the justification of penalties under Rule 173Q for contraventions of Modvat Rules. The Tribunal noted the potential revenue risk in non-compliance and upheld the penalty based on established manufacturing violations.

5. The Tribunal analyzed the compliance with Rule 57G, emphasizing that the substantive requirement of the scheme is the utilization of duty-paid inputs against final products. Despite procedural lapses in storing and utilizing inputs 500 yards away from the licensed premises, the Tribunal deemed the compliance substantive, warranting modvat credit.

6. Regarding the imposition of penalties for Modvat Rule violations, the Tribunal held that penalties can be justified even without mens rea if there is a violation of rules. The Tribunal dismissed both the Reference Application and the cross-objections, upholding the penalty for established manufacturing violations disregarding legal provisions.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal concerning modvat credit, compliance with Modvat Rules, and the imposition of penalties for violations.