1997 (10) TMI 160 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Rule 173Q(1)(bb) of the Rules for availing Modvat credit without declaring transformer as a finished product under Rule 57G.

Detailed Analysis:
The appeal challenged the penalty imposed by the Additional Collector of Central Excise and Customs on the appellants for availing Modvat credit without declaring transformer as a finished product. The appellants had paid the consequential duty amount of Rs. 49,629.60 after being informed by Departmental Officers in 1988. Subsequently, a show cause notice was issued in 1989 leading to the impugned order by the Additional Commissioner of Central Excise. The appellants argued that they had mentioned the utilization of Modvat credit for the transformer in their monthly returns and classification list. They also voluntarily debited the duty in their Personal Ledger Account and sought restoration of credit in their Modvat account. Citing precedent decisions, the appellants contended that non-filing of declaration under Modvat credit does not warrant the extended period for recovering the credit, and non-filing can be considered as a failure but not suppression. The appellants had not resisted the demand and had already paid it, thus requesting the penalty to be set aside.

The Department argued that mens rea is not a necessary element for imposing penalty under the Rule, and as long as the violation of rules is proven, penalty can be imposed without considering mens rea. The Department highlighted that there is no time limit for imposing penalty and emphasized the appellants' awareness of the statutory requirement to file a declaration for the final product before availing Modvat credit due to their year-long participation in the Modvat scheme. Therefore, the Department supported the penalty imposed on the appellants.

Upon careful consideration, the Tribunal found that the precedent decisions cited by the appellants supported their case for waiving the penalty. These decisions involved similar facts where Modvat credit was taken on undeclared input/final product, but intimation had been provided in the statutory monthly returns enclosing related transaction invoices. The Tribunal concluded that demanding duty under the extended time limit and imposing a penalty would not be justified in such circumstances. While setting aside the penalty, the Tribunal reminded the appellants of their responsibilities as Central Excise Rules' assessee. The Tribunal disposed of the appeal accordingly.