2001 (1) TMI 318 - AT - Central Excise

Summary

Issues:
1. Whether a penalty of Rs. 1,00,000/- was justified in the case involving the availing of credit of duty on furnace oil and LDO by cement manufacturers at a rate of 15%?

Analysis:
1. The issue revolved around the imposition of a penalty of Rs. 1,00,000/- on the appellant for availing excess Modvat credit on furnace oil and LDO. The cement manufacturers association had taken up the matter with authorities regarding the reduction of credit from 15% to 10% under Rule 57A of the Central Excise Rules, 1944. The appellants informed the department about their intention to raise credit to 15% but not utilize 5% until the matter was resolved. Despite reversing the excess credit before the show-cause notice, a penalty was imposed by the Assistant Commissioner, citing the appellant's conduct as autocratic and a disregard for the law.

2. The Commissioner (Appeals) acknowledged that the appellants had filed but not utilized the excess credit, reducing the penalty to Rs. 1,00,000. The appellant contended that as the excess credit was reversed before the notice, no penalty should apply. They cited precedents to support their argument, emphasizing that the conduct and intentions of the appellants should be considered in determining the penalty.

3. The department argued that even if the excess credit was not utilized, the penalty under Rule 173Q(1)(bb) was still applicable due to the amount involved. They maintained that the penalty should not be further reduced as the Commissioner (Appeals) had already taken a lenient view.

4. The Tribunal analyzed the submissions and facts, concluding that the imposition of the penalty based on an "autocratic manner" was unfounded. The appellants' actions were deemed as seeking redressal rather than autocratic. While acknowledging a potential violation of Rule 226 for taking credit in excess of 10%, the Tribunal upheld the invocation of Rule 173Q(1)(bb) but decided to reduce the penalty to Rs. 2,000 considering the nature of the offense and the maximum liability specified under Rule 226.

5. Ultimately, the Tribunal confirmed the penalty at Rs. 2,000 under Rule 173Q(1)(bb) and allowed the appeal to that extent only, disposing of the appeal and stay petitions accordingly.