1996 (4) TMI 300 - AT - Central Excise

Summary

Issues:
1. Recovery of duty under Modvat scheme.
2. Imposition of personal penalty.
3. Maintenance of proper records for Modvat credit.
4. Invocation of extended period for demand.

Analysis:

Issue 1: Recovery of duty under Modvat scheme
The Commissioner held that the appellants wrongly took credit of duty under the Modvat scheme, amounting to Rs. 24,785, on inputs used for manufacturing goods cleared as exempted. The Commissioner ordered the recovery of this amount under Rule 57-I of the Central Excise Rules, 1944. The appellants argued that they did not claim Modvat credit on the inputs used for goods cleared without payment of duty. However, the Tribunal found that there were inadequate remarks in the records to show how the inputs were being used in the manufacture of exempted goods. The Tribunal referred to Rule 57C, which prohibits taking Modvat credit if the final product is exempt, and upheld the recovery of duty amounting to Rs. 24,785.

Issue 2: Imposition of personal penalty
In addition to the duty recovery, a personal penalty of Rs. 5,000 was imposed on the appellants by the Commissioner. The appellants contended that there was no suppression of facts and that the longer period for demand should not be invoked. However, the Tribunal found that the appellants failed to adequately demonstrate that no Modvat credit was taken on the inputs used for exempted goods. Therefore, the Tribunal upheld the imposition of the personal penalty.

Issue 3: Maintenance of proper records for Modvat credit
The appellants argued that they maintained records indicating that no Modvat credit was taken on certain inputs used for exempted goods. They referred to entries in the RG-23A Part I register and RT-12 returns. However, the Tribunal found that the records did not clearly establish that Modvat credit was not taken on the inputs used for exempted goods. The Tribunal emphasized the importance of maintaining separate records for such transactions to avoid ambiguity.

Issue 4: Invocation of extended period for demand
The appellants challenged the invocation of the extended period for demand, arguing that there was no suppression of facts. The Tribunal noted that the appellants failed to provide sufficient evidence to support their claim that no Modvat credit was taken on the inputs used for exempted goods. Therefore, the Tribunal upheld the Commissioner's decision to invoke the extended period for demand.

In conclusion, the Tribunal upheld the Commissioner's order for duty recovery and personal penalty, emphasizing the importance of maintaining clear records for Modvat credit transactions and complying with the rules regarding exemptions and duty payments.