1999 (11) TMI 497 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit on capital goods under Rule 57Q of Central Excise Rules, 1944.
2. Allegations of suppression and mis-statement of facts leading to recovery of duty, penalties, and interest.
3. Claim of bona fide error by the applicants and subsequent corrective actions taken.
4. Interpretation of Section 11AC regarding penalties for contraventions.
5. Financial viability of the applicants and determination of penalty amounts.

Analysis:
1. The applicants availed Modvat credit on capital goods under Rule 57Q of the Central Excise Rules, 1944, amounting to Rs. 43,13,347 during 1994-95, 1995-96, and 1996-97. The rule allowed credit only if depreciation under Section 32 of the Income-tax Act, 1961, was not claimed. The department later found that the applicants had indeed claimed such benefits, leading to a show cause notice for recovery of the credit taken.

2. The Commissioner's order confirmed the recovery of the amount, imposed penalties under Section 11AC, and directed interest recovery. The applicants argued that their error was unintentional and rectified by filing revised IT returns, negating the benefit taken. They contended that no penalty should be imposed, especially since Section 11AC was introduced after the contraventions occurred.

3. The counsel for the applicants claimed that the revised IT returns showed no additional liabilities under the Income-tax Act, but failed to demonstrate the discharge of obligations resulting from the initial benefit claimed. The Tribunal noted that waiving the benefit after availing it did not absolve the liability under the rules, emphasizing the clear obligation specified in the declaration required by the Rules.

4. Despite the applicants' argument of a bona fide impression regarding simultaneous benefits under different laws, the Tribunal found the action pre-meditated due to the specific wording of the declaration. The plea of limitation was not sustained, and the Tribunal directed the applicants to deposit penalties and the inadmissible Modvat credit within a specified timeframe.

5. Considering the repeated incorrect declarations over three years and the financial stability of the applicants, the Tribunal ordered a penalty deposit of Rs. 13,07,707 and a sum of Rs. 25,00,000 towards the inadmissible credit. The compliance deadline was set, emphasizing the need for timely payment and reporting to the Tribunal.