2000 (2) TMI 381 - AT - Central Excise

Issues Involved:
1. Alleged contravention of Rule 57G of Central Excise Act regarding Modvat credit for raw material.
2. Failure to file declaration for final product Iodine IP/BP/USP.
3. Imposition of penalty under Rule 173Q(1)(bb).
4. Compliance with Rule 57G for availing Modvat credit.
5. Time bar in issuing show cause notice.

Issue 1: Alleged contravention of Rule 57G of Central Excise Act regarding Modvat credit for raw material:
The case involved the appellant's appeal against a show cause notice alleging contravention of Rule 57G for taking Modvat credit without declaring the final product Iodine IP/BP/USP. The appellant argued that although crude Iodine was declared for Modvat, refined Iodine was not declared as the final product. The lower authorities confirmed the demand, but the appellant contended that the inputs were utilized in manufacturing the final product, and the non-filing of declaration should not be an issue. The Tribunal considered various case laws and concluded that the appellant's contention was valid. The appeal was allowed in part, setting aside the demand of Modvat credit and remanding the matter for further verification.

Issue 2: Failure to file declaration for final product Iodine IP/BP/USP:
The appellant admitted the violation of Rule 57G by not filing a declaration for the final product before availing Modvat credit. The appellant acknowledged the inadvertent mistake and expressed willingness to pay duty on the final product. The Tribunal noted the appellant's rectification of the breach and reduced the penalty accordingly. The appellant's main concern was the availment of credit, and the Tribunal found the reduction of penalty justified based on the facts and circumstances of the case.

Issue 3: Imposition of penalty under Rule 173Q(1)(bb):
The penalty imposed on the appellant was reduced from Rs. 16,000/- to Rs. 5,000/- in the appeal process. The Tribunal found the reduction reasonable considering the appellant's conduct in rectifying the breach and the inadvertent nature of the violation. The appellant's willingness to pay duty on the final product and rectify the mistake supported the reduction in penalty.

Issue 4: Compliance with Rule 57G for availing Modvat credit:
The Tribunal emphasized the importance of complying with Rule 57G for availing Modvat credit, stating that it is a substantial requirement under the Central Excise Rules. Failure to comply with the rule deprives manufacturers of the benefit of the credit scheme. The Tribunal highlighted that the appellant had taken a significant amount of credit without fulfilling the statutory obligation, which warranted scrutiny. The orders of the lower authorities were considered just and proper in upholding the compliance requirements for availing Modvat credit.

Issue 5: Time bar in issuing show cause notice:
Regarding the time bar in issuing the show cause notice, the Tribunal found that the notice dated 3-5-1993 for the period of October 1992 was within six months of the credit utilization on 4-11-1992. The Tribunal concluded that the notice was not time-barred, as the demand was raised within the statutory limit. The issue of the time bar was answered positively on the merits of the case.

In conclusion, the Tribunal allowed the appeal in part, setting aside the demand of Modvat credit, remanding the matter for further verification, and confirming the penalty imposed on the appellant. The judgment highlighted the significance of compliance with Rule 57G for availing Modvat credit and addressed the issues raised by the parties in a comprehensive manner.

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