1999 (7) TMI 222 - AT - Central Excise

Summary

Issues:
Prayer for dispensing with the condition of pre-deposit of penalty amount under Central Excise Rules, 1944 and Section 11AC.

Analysis:
The appellants sought dispensation from pre-depositing a penalty amount of Rs. 21,43,309/- imposed under Central Excise Rules, 1944 and an equal penalty under Section 11AC. The dispute arose from the requirement to reverse Modvat credit under Rule 57F (17) (b) effective from 1-3-1997. The proviso exempted inputs in stock or finished products as of 1-3-1997. The appellants reversed Modvat credit on inputs in semi-finished stage, leading to subsequent declarations and entries. The Central Excise authorities seized goods not entered in RG 1 register, prompting the appellants to explain certain goods' unfinished status and delayed entries. The financial distress of the appellants, seeking BIFR declaration, was highlighted, relying on a Supreme Court judgment suspending legal proceedings for sick industrial units. The appellants' case was registered with BIFR, indicating potential relief. The Tribunal acknowledged the appellants' compliance with declarations and Modvat reversals, finding no justification for penalties or confiscation due to unfinished goods still on premises.

The Department contended the excess final products found, unrelated to Modvat reversals, were fully packed and ready for entry in RG 1 register. Disputing the appellants' explanation for delayed entries, the Department cited a Trade Notice and questioned the financial distress claim without BIFR's sick company status confirmation. The Department urged rejection of the application based on these grounds. The Tribunal assessed both arguments, agreeing with the appellants' compliance with declarations and Modvat reversals. Noting the goods' reflection in declarations and the BIFR registration, the Tribunal rejected the Department's objection regarding the mere application to BIFR without sick company status. Citing the Supreme Court precedent suspending legal proceedings for registered BIFR cases, the Tribunal unconditionally allowed the stay petition, considering the entire case's circumstances.