9911796707
TMI Blog2011 (3) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner (Appeals) has confirmed the order passed by the adjudicating authority. The Joint Commissioner by his order dated 27.1.2005, had disallowed the modvat credit amounting to Rs.11,61,660/- and had ordered recovery thereof as also had imposed equal amount of penalty. The appellants are challenging the impugned order to the extent it imposes penalty. 3. At the outset, the learned Advocate appearing for the appellants submitted that though the Memo of Appeal states to various grounds, the Appellants are confining the challenge to the penalty aspect only. Drawing our attention to Rule 57(1)(4) and Rule 57-AH(2) of the Central Excise Rules, 1944 and placing reliance on the decision in the matter of Kalyani Brakes Ltd Vs CCE Aurangabad reported in 2003 (162) ELT 163 and Punjab Communications Ltd Vs CCE Chandigarh reported in 2002 (145) ELT 301 (Tri.-Del), the learned Advocate for the Appellants submitted that undisputedly when the credit was utilized, inputs in question were very much in existence and therefore, there is no case of wrongful availment or wrongful utilization of the credit. It is undisputed fact that the credit was availed prior to 1st January, 1998 and go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original authority disclosed that the penalty was imposed in exercise of the powers under Rule 57(1)(4) read with Rule 57-H(2) of the Central Excise Rules, 1944 and Rule 13(2) of the Central Excise Rules, 2001-02. 7. Rule 57-1 deals with the recovery of credit wrongly availed or utilized in an irregular manner. Sub-Rule (4) thereof provides that where the credit of duty paid on inputs have been taken wrongly by reason of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intention to evade payment of duty, the person who is liable to pay the amount equivalent to the credit disallowed, as determined under clause (iii) of sub-rule (1) shall also be liable to pay penalty equal to the credit so disallowed. Explanation-I to the said sub-rule provides that where credit disallowed is reduced by the Commissioner of Central Excise (Appeals), the Appellate Tribunal or as the case may be, a Court of law, the penalty shall be payable on such reduced amount of credit disallowed. Similar is the provision under Explanation-II in case of upward modification of allowance or disallowance of cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tches. The Tribunal held thus:- We consider that the provisions of Rule 57-D are clear and unambiguous. Only when the inputs are contained in any waste, refuse or by product arising during the manufacture of the final product or when the inputs have become waste during the course of manufacture of the final product, the provisions of Rule 57-D were applicable. If the inputs are found defective and are not used in the process of manufacture of final products, the benefit of Rule 57-D is not applicable to such inputs. Only when the inputs are used n the manufacture of final products and some of those inputs become waste during the course of manufacture of the final product, th credit already taken in respect of such inputs wasted was not to be denied. In the present case, the appellants record in form RDW had not been examined by the adjudicating authority with such understanding in view. He had taken a general view that in all cases the inputs were found defective before they were put to use. We consider that it would be in the interest of justice if the appellants are given an opportunity to explain their records and place evidence with regard to the specific inputs which had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an obligation to disclose something and when there is failure to disclose the same. There can hardly be any quarrel about this proposition of law. However, the fact remains that in this case, the appellant themselves state that credit was availed on the inputs in question and was utilized prior to January 1998. Till March, 2000, the factory of the Appellants remained closed. During this period, the concerned inputs were destroyed. Being so, undisputedly, it was necessary for the Appellants to reverse the credit. Admittedly, even after re-commencement of the factory of the Appellant, no steps were been taken by the appellants to reverse the credit or repay the amount. The requirement of reversal on account of destruction of inputs in question and credit earned by them and utilized was not disclosed to the department. Therefore, the obligation on the part of the appellant to reverse or repay credit was not complied with and hence there is suppression of the fact by the appellant. 16. It is also the contention of the learned Counsel for the appellant that in terms of relevant Rule, it cannot be said that there was wrong availment of the credit by the appellant. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that account. 22. Once this position is clear, the appellant had no option but to reverse the credit or repay the amount. In other words, once it was known to the appellant that the goods on which credit was taken, such inputs could not be utilized in terms of the Rules for manufacture of final product, the appellant was aware that from that point of time, that such utilization of credit was rendered wrongful. The allegation of wrong utilization is to be seen with reference to that point of time when the credit became ineligible. The expression would in the case of situation from the penalty would allow such utilization to be rendered wrongfully Once of such utilization is where the inputs are rendered useful in the manufacture of final product and the penalty has already utilized the credit towards the payment of duty to some other final product. Those such situation that arises in hand, it cannot be aid that the appellants were not guilty of suppression of fact. In the case of Punjab Communication case and in Kalayni Brakes this aspect arose for consideration. 23. In view of what is stated above, we do not find any infirmity in the order passed by the Commissioner. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
