2004 (12) TMI 450

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..... roducts, by the appellants. 2. Ld. Counsel has contended that the appellants are entitled to claim credit even on the broken shells not used in or in relation to the manufacture of the final products. He referred to the provisions of Rule 196 of the Central Excise Rules under which exemption to the payment of duty has been provided where the goods were removed under Chapter X procedure. He has also contended that the appellants were working under the bona fide belief that they were entitled to the credit on the broken shells also and there was no mala fide intention on their part to avoid the payment of the duty, therefore, no penalty could be imposed. 3. On the other hand, ld. SDR has reiterated the correctness of the impugned order an .....

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..... no advantage of the provisions of Rule 196 can be claimed by the appellants. 7. It is well settled that on the inputs which had not gone into the manufacture of the final products, no Modvat credit can be claimed by any assessee. Therefore, the appellants have been rightly denied the Modvat credit of the amount in question by the authorities below. The impugned order, in this regard, is perfectly valid. 8. Another contention of the Counsel that the Modvat credit has not been properly computed also, cannot be accepted. The breakage percentage was 4% of the entire purchase/receipt of the glass shells by the appellants and this fact was even admitted by them in their letter dated 6-2-97. After taking into account this percentage, the amoun .....

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..... of the fact that some of the period in dispute is still covered under Section 11AC, as the period involved is 1993-94 to 1996-97 while Section 11AC came into force on 28-8-96. Apart from this, the provision of Rule 57-I(4) are fully attracted to the case and the ld. Commissioner (Appeals) has failed to appreciate while setting aside penalty under Section 11AC, the need for imposition of penalty on the appellants under this rule for having availed Modvat credit, illegally. Therefore, we are unable to sustain the impugned order of the Commissioner (Appeals) regarding setting aside of the penalty on the appellants in toto, which was imposed by the adjudicating authority under Rule 57-I(4) also. Therefore, we impose penalty of Rs. 36,444/- as .....

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