1998 (6) TMI 165 - AT - Central Excise

Summary

Issues:
- Whether Modvat credit in respect of electric wires and cables under Rule 57Q as capital goods makes the respondents liable for a penalty under Rule 173Q.

Analysis:
1. Imposition of Penalty: The central issue in this appeal before the Appellate Tribunal CEGAT, New Delhi was whether the respondents were liable to be penalized under Rule 173Q for taking Modvat credit in relation to electric wires and cables under Rule 57Q as capital goods. The Asstt. Commissioner disallowed the Modvat credit of Rs. 22,440 taken by the respondents and imposed a penalty of Rs. 2,000. On appeal, the Commissioner (A) noted that the penalty would not apply if the credit remained unutilized in the RG23 C Part II account. The revenue challenged this observation, leading to the appeal before the Tribunal.

2. Legal Arguments: The Appellant's representative argued that the penalty under Rule 173Q could be imposed for various reasons, including the wrongful taking of Modvat credit, as confirmed by the lower appellate authority. Therefore, the Appellant sought to set aside the Commissioner (A)'s observation regarding the penalty's imposition even if the credit remained unutilized. On the other hand, the Respondent's representative contended that several Tribunal judgments recognized electric wires and cables as capital goods eligible for Modvat credit, indicating a genuine belief in claiming the credit. The Respondent argued against the imposition of a penalty based on these grounds.

3. Tribunal's Decision: After considering both parties' arguments, the Tribunal agreed with the Respondent's representative that there was no basis for imposing a penalty in the circumstances of the case. However, the Tribunal also acknowledged the Appellant's position that a penalty could be imposed if the Modvat credit was wrongly taken, irrespective of its utilization status. Consequently, the Tribunal set aside the penalty imposed on the respondents and deleted the Commissioner (A)'s observation suggesting otherwise. The appeal was disposed of accordingly, following its admission.

In conclusion, the Tribunal's judgment clarified the circumstances under which a penalty under Rule 173Q could be imposed for the wrongful taking of Modvat credit, emphasizing the importance of a genuine belief supported by legal precedents in claiming such credits.