2000 (8) TMI 809 - AT - Central Excise

Summary

Issues:
Recovery of duty and penalty based on the assumption of intended use of aluminum ingots, limitation for recovery proceedings, one-to-one correlation between credit availed on inputs and utilization, imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis:
1. Recovery of Duty and Penalty:
The appeal was filed against the recovery of a substantial sum demanded as duty and penalty imposed on the company. The Department alleged that the aluminum ingots were intended only for the manufacture of 'corrugated sheets', and any credit taken on these ingots should not have been utilized for other products. The consultant representing the appellant argued that the assumption made by the Department was not supported by the record. The appellant had declared different final products for which the inputs were intended, including unwrought aluminum for various products, not limited to 'corrugated sheets'. The consultant contended that the credit taken on aluminum ingots could be used for all final products as per Rule 57 F. The Tribunal agreed with the consultant's interpretation, finding no wrongdoing by the appellant, and held that the demand for duty lacked merit.

2. Limitation for Recovery Proceedings:
Regarding the limitation for recovery proceedings, the Collector found that the Department could invoke the extended period due to the suppression of material facts by the appellant. However, the appellant argued that they had submitted returns as required by statute, detailing duty payments and input credit under the Modvat scheme, which were scrutinized by the Excise Authorities. The Tribunal disagreed with the Collector's findings on limitation, stating that the relevant declarations and returns were filed with Range Officers and could have been discovered without much effort. The Tribunal observed that a considerable amount of duty had been paid, indicating no concealment of credit utilization by the appellant, and deemed the proceedings as time-barred.

3. One-to-One Correlation and Imposition of Penalty:
The Tribunal found that there was no requirement for a 'one-to-one' correlation between the credit availed on inputs and their utilization under the Modvat credit rules. The rules allowed for instantaneous credit on receipt of inputs, which could be used immediately to clear goods. The Tribunal disagreed with the Commissioner's findings that specified inputs must be utilized for declared final products, as the rules did not mandate such segregation. Additionally, the Tribunal found no specific reason in the impugned order to justify the imposition of a penalty under Rule 173Q. The rules did not provide for a penalty if credit was correctly availed and accounted for, and there was no evidence of non-compliance. As the demands were time-barred and not sustainable on merits, the Tribunal ruled out the imposition of a penalty.

4. Conclusion:
Based on the findings, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant. The Tribunal found no merit in the Department's assumptions regarding the intended use of aluminum ingots, upheld the appellant's argument on limitation, and rejected the necessity for a one-to-one correlation between credit availed and utilization. Additionally, the Tribunal found no justification for the imposition of a penalty under Rule 173Q, as there was no evidence of non-compliance and the demands were time-barred.