1999 (10) TMI 208 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit claimed by the appellant as transitional Modvat credit under Rule 57H.
2. Imposition of personal penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis:

Issue 1: Denial of Modvat credit under Rule 57H
The appellant, a Small Scale Industry engaged in manufacturing, availed Modvat credit during 1994-95 and opted for a small scale exemption in 1995-96, resulting in the need to reverse Modvat credit of Rs. 1,36,044.38. The appellant paid back Rs. 46,512.04 in piecemeal during 1-4-1995 to 11-6-1995. Subsequently, they deposited the balance amount of Rs. 89,532.34 and claimed Modvat credit of Rs. 86,902.54 under Rule 57H. The Asstt. Commr. denied this credit, stating that once the credit was reversed, the inputs lost their duty paid character. However, the Tribunal held that the denial was unjustified, emphasizing that the character of the inputs does not affect availing transitional credit. Citing a similar case, the Tribunal ruled that the credit could be taken if the inputs were used in the final product cleared on payment of duty. The Tribunal validated the deposit made by the appellant but held that denial of Modvat credit was not justified.

Issue 2: Imposition of Personal Penalty under Rule 173Q
The appellant failed to reverse the entire duty amount when switching to the exemption notification, contrary to legal requirements. Consequently, a penalty of Rs. 2,000 was imposed under Rule 173Q of the Central Excise Rules, 1944. The Tribunal upheld this penalty, stating that the appellant circumvented the law by not paying back the full duty amount during the transition. Thus, the penalty was confirmed by the Tribunal.

In conclusion, the Tribunal ruled in favor of the appellant regarding the denial of Modvat credit under Rule 57H but upheld the imposition of the penalty under Rule 173Q due to the appellant's failure to comply with legal obligations during the transition period. The matter was remanded to the Asstt. Commissioner for verification of the appellant's claim of Modvat credit, while the penalty was confirmed by the Tribunal.