1994 (8) TMI 146 - AT - Central Excise

Issues Involved:

1. Imposition of penalty under Rule 173Q.
2. Allegation of fraud, collusion, and willful misstatement.
3. Legality of the penalty amount and consideration of interest.
4. Admissibility and credibility of evidence.
5. Justification for enhancement of penalty.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Rule 173Q:
The primary issue in the assessee's appeal was the imposition of a penalty of Rs. 1 crore under Rule 173Q. The assessee argued that the penalty was not legally sustainable and should be considered as interest on the wrong credit taken due to a bona fide clerical error. However, the Tribunal found that the credit of Rs. 1.17 crores was wrongly taken and utilized without any authority, constituting a violation of Rule 173Q(1)(a). The Tribunal held that even in the absence of mens rea, the penalty was legally justifiable under Rule 173Q(1)(a) because the excess credit was taken unauthorizedly and used for duty payment, resulting in clearance of final products without payment of duty.

2. Allegation of Fraud, Collusion, and Willful Misstatement:
The Revenue's appeal contended that the Collector's findings, which absolved the assessee of fraud, collusion, and willful misstatement, were incorrect. The Tribunal reappreciated the evidence and found that the statements of the employees, who were responsible for maintaining the records, indicated that the false credit was deliberately taken under the instructions of higher officials. The Tribunal concluded that there was a deliberate false entry made with the knowledge of the authorized officers, thus constituting a willful misstatement. The Tribunal also noted that the presence of Shri Pai in Ahmedabad during the crucial period and his visit to the office on the day the wrong credit was made corroborated the statements of the employees.

3. Legality of the Penalty Amount and Consideration of Interest:
The assessee's plea to treat the penalty amount as interest was rejected by the Tribunal. It was held that the authorities functioning under the statute must go by the provisions prescribed in the statute, and there was no provision in the Act or Rules for levying interest on delayed payments of duty. The Tribunal emphasized that it could not modify the penalty to interest in the absence of specific statutory provisions.

4. Admissibility and Credibility of Evidence:
The Tribunal addressed the credibility of the statements given by the employees, who later retracted their statements, claiming they were given under duress. The Tribunal found that the original statements were credible and consistent, whereas the retractions appeared to be influenced by the threat of departmental action. The Tribunal also noted that the employees' statements were corroborated by other evidence, such as the presence of Shri Pai in Ahmedabad and his visit to the office on the day the wrong credit was made.

5. Justification for Enhancement of Penalty:
The Revenue sought an enhancement of the penalty, arguing that the penalty imposed was insufficient given the deliberate nature of the false entry. The Tribunal, however, found that the penalty of Rs. 1 crore was adequate and met the ends of justice. The Tribunal considered the post-detection conduct of the assessee, including the prompt payment of the duty amount and the offer to pay interest. The Tribunal also noted that the Department had a share of the blame for not detecting the wrong credit earlier, despite the submission of RG 23 Part II copies along with RT 12 returns. The Tribunal concluded that enhancing the penalty further would not be justified, especially when prosecution proceedings against the assessee were already underway.

Conclusion:
The Tribunal rejected the appeal from the assessee and upheld the penalty of Rs. 1 crore. The Tribunal also rejected the Revenue's appeal for enhancement of the penalty, finding that the penalty imposed was fair and reasonable given the circumstances. The Tribunal emphasized the importance of adhering to statutory provisions and the credibility of evidence in adjudicating such cases.

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