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2014 (11) TMI 707 - AT - Central ExciseMODVAT Credit - Whether penalty is imposable under Rule 57 (I) (4) of CER for the period 23.07.1996 to 28.09.1996 - Held that - Respondents have not reversed the Modvat credit availed on the goods ie., controllers, drivers etc., cleared to their customers as warranty replacement. Both the contravention of Rule 57(I) and suppression of facts were clearly brought out in the show cause notice as the respondents have cleared the goods to their customers as warranty replacement without following any of the procedures prescribed under Central Excise Rules. Further, it is seen that the adjudication authority in his order dated 21.12.99 has clearly discussed in his findings for invoking extended period and imposition of penalty under Section 11 AC read with Rule 57(I) of the CER. Penalty is not imposable for the period prior to 23.07.1996, as the provision under 57(I) came into effect from this date and also set aside the penalty for the subsequent period. The Revenue has clearly brought out in the show cause notice and in the adjudication order, the contraventions, suppression of facts with intent to evade payment of duty, as the respondents have cleared the modvatable inputs to their customers as warranty replacement without reversing the modvat credit taken on them and without following any procedure prescribed under the Central Excise Rules. Once the contravention of Rule and suppression of facts have been proved for invoking penal provisions stipulated under Section 11AC read with Rule 57(I) (4) of CER, the imposition of penalty becomes mandatory on the part of adjudicating authority. penalty is imposable under Rule 57(I) (4) of CER read with Section 11AC of CEA, pertaining to the period from 23.07.1996 to 28.09.1996. - Following decision in UOI Vs. Rajasthan Spinning & Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA - Decided in favour of Revenue.
Issues Involved:
1. Imposition of penalty under Rule 57(I)(4) of the Central Excise Rules, 1944 for the period post 23.07.1996. 2. Contravention of Central Excise Rules by the respondents. 3. Suppression of facts with intent to evade payment of duty. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Rule 57(I)(4) of the Central Excise Rules, 1944 for the period post 23.07.1996: The Tribunal had initially dismissed the Revenue's appeal regarding the imposition of penalty under Rule 57(I)(4) for the period post 23.07.1996, on the grounds that the rule came into effect on 23.07.1996. However, the Hon'ble High Court of Madras remanded the matter back to the Tribunal, directing it to reconsider the question of penalty imposition under Rule 57(I)(4) for the period after 23.07.1996. The Tribunal, upon reconsideration, found that the respondents had not reversed the Modvat credit availed on goods cleared as warranty replacements, which violated Rule 57(I). The Tribunal held that the imposition of penalty was mandatory once contravention and suppression of facts were established, as per the Hon'ble Supreme Court judgment in UOI Vs. Rajasthan Spinning & Weaving Mills. Consequently, the Tribunal allowed the Revenue's appeal to the extent of imposing the penalty for the period from 23.07.1996 to 28.09.1996. 2. Contravention of Central Excise Rules by the Respondents: The respondents were engaged in the manufacture of 'Automation Equipments' and availed Modvat credit on inputs and components. They also used these Modvat availed components for after-sales service without reversing the Modvat credit. The adjudicating authority found that the respondents had contravened provisions of Rules 52A and 57F of the Central Excise Rules, 1944, by not reversing the credit on inputs cleared as warranty replacements. The show cause notice and adjudication order clearly established these contraventions, leading to the demand for duty and imposition of penalties. 3. Suppression of Facts with Intent to Evade Payment of Duty: The adjudicating authority and the show cause notice highlighted that the respondents had deliberately suppressed facts by not disclosing the clearance of inputs and finished products as warranty replacements, thereby evading payment of central excise duty. The Tribunal noted that the respondents cleared Modvatable inputs to customers without following any prescribed procedures under the Central Excise Rules. The Hon'ble Supreme Court's judgment in UOI Vs. Rajasthan Spinning & Weaving Mills clarified that penalty under Section 11AC is applicable when there is a deliberate attempt to evade duty, which was evident in this case. Thus, the Tribunal upheld the imposition of penalty for the period post 23.07.1996. Conclusion: The Tribunal concluded that the penalty under Rule 57(I)(4) of the Central Excise Rules, 1944, read with Section 11AC of the Central Excise Act, 1944, was imposable for the period from 23.07.1996 to 28.09.1996. The impugned order of the Commissioner (Appeals) was modified to this extent, and the Revenue's appeal was allowed accordingly.
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