1997 (8) TMI 305 - AT - Central Excise

Summary

Issues:
Dispensation of pre-deposit penalty under Rule 57U(5) for wrongly taken Modvat credit.

Detailed Analysis:

Issue 1: Dispensation of Pre-Deposit Penalty
The appellant sought dispensation of a penalty of Rs. 42,36,757 levied under Rule 57U(5) for wrongly taken Modvat credit. The appellant argued that they had reversed the entire credit taken during 1995-96 and had not utilized any portion of the credit wrongly. The appellant relied on the statutory provision and the Supreme Court judgment in M/s Brij Mohan v. CIT to support their case that the penalty should be governed by the law prevailing at the relevant time. The appellant contended that since there was no allegation of wrong utilization of credit, the penalty could not have been levied. The issue was narrowed down to the quantum of penalty to be imposed.

Issue 2: Quantum of Penalty
The department argued that the appellant had taken a large amount of Modvat credit without bringing goods into their factory, raising concerns about possible mis-utilization. The Tribunal acknowledged that the appellant had wrongly taken the Modvat credit but focused on determining the appropriate quantum of penalty. The Tribunal noted that the penalty was levied under Rule 57U(5) introduced in July 1996, while the offense occurred between October '95 and January '96. Referring to the Supreme Court judgment, the Tribunal held that the penalty should be based on the law applicable at the time of the offense. Despite finding the appellant liable for penalty, the Tribunal considered factors such as lack of wrongful utilization of credit and the reversal of credit, ultimately reducing the penalty to Rs. 5,00,000 in the interest of justice.

In conclusion, the Tribunal granted dispensation of the pre-deposit penalty but modified the penalty amount to Rs. 5,00,000, considering the specific circumstances and the absence of mala fides in the appellant's actions.