1997 (7) TMI 297 - AT - Central Excise

Summary

Issues:
Dispensation of pre-deposit of penalty of Rs. 63 Lakhs for removal of inputs without payment of duty in violation of Rule 57F.

Analysis:
The appellants, a Government of India Undertaking, sought dispensation of penalty after paying the demanded duty amount of Rs. 62,71,869 under protest. The Consultant argued that as per a Larger Bench decision, duty payable should equal the Modvat credit taken. The department contended that the appellants admitted liability of Rs. 44,96,478, equivalent to Modvat credit, justifying penalty imposition. The Tribunal found the case aligned with the Larger Bench decision, focusing on penalty quantum. With no contest on Modvat credit, the penalty amount was the key issue. The appellants' Consultant acknowledged past mistakes but emphasized payment equality to Modvat credit. The Tribunal noted the appellants' financial advantage from duty evasion and calculated interest liability at Rs. 40 lakhs. Despite the appellants' plea for nominal penalty, the Tribunal considered the duty advantage and upheld the penalty at Rs. 50 Lakhs, with excess payment adjustment.

The Tribunal questioned the appellants' oversight in duty evasion from 1988-1993 despite internal audits. It rejected the plea of bona fides due to silence on duty evasion detection and delayed payment post clearance. Considering the financial benefit gained by the appellants, the Tribunal upheld the penalty reduction to Rs. 50 Lakhs based on the Larger Bench decision. The penalty was set after adjusting the excess payment made by the appellants against the Modvat credit amount. The Tribunal emphasized justice served through penalty imposition despite the appellants' arguments for leniency. The appeals were concluded with the penalty set at Rs. 50 Lakhs, reflecting the Modvat credit taken and financial advantage gained by the appellants.