The Commissioner Central Excise, Nagpur v. The Customs Excise and Gold (Control) Appellate Tribunal & another

Nagpur vide order dated 31.07.1997 confirmed the demand of reversal of credit of Rs.1,70,111/- under Rule 57-I and imposed penalty amounting to Rs.5,00,871/- under Rule 57-I(4). The Commissioner of Central Excise further imposed penalty of Rs.1,50,000/- under Rule 173-Q of the Rules of 1944. The respondent no.2 preferred an appeal against the order passed by the Commissioner, Central Excise, Nagpur before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), WZB, Mumbai for quashing and setting aside the order dated 31.07.1997 on the ground that the irregular credit was availed by respondent no.2 due to technical irregularity without any revenue implications. The CEGAT, Mumbai, by the order dated

20.02.2003, set aside the order of the Commissioner, Central Excise, Nagpur by allowing the appeal filed by the respondent no.2 on the ground that there was no proposal in the show cause notice to deny MODVAT credit wrongly availed on sponge iron, skull scrap and electrolytic grade Copper & ship-breaking scrap. The applicant, Commissioner of Central Excise, Nagpur is aggrieved by the order passed by the CEGAT, Mumbai, and therefore, has sought a direction to the CEGAT to draw up a statement 4 of case and to refer to this Court the questions of law framed in this reference application and arising from the order of the CEGAT. It is submitted on behalf of the applicant by Mr. F.T. Mirza that CEGAT was not justified in holding that the penalty imposed for irregular availment of credit on the sponge iron, skull scrap and electrolytic grade Copper & ship-breaking scrap was not sustainable. According to the counsel for the applicant, the mandatory penalty was imposable under Rule 57-I(4) of the Central Excise Rules, 1944 which was brought into effect from 23.07.1996, specially when there was an element of suppression of short receipt of modvatable inputs. It was then submitted on behalf of the applicant that the applicability of Section 11 AC of the Central Excise Act, 1944 was dependent on the determination of the amount of duty, liability and confirmation thereof under Section 11A of the Central Excise Act, 1944 whereas the application of Rule 57-I(4) was dependent on determination of credit wrongly availed under Sub Rule (1) of Rule 57-A of the Central Excise Rules, 1944. According to the counsel for the applicant, the CEGAT, Mumbai was, therefore, not justified in relying on the decision reported in 2000(120)E.L.T. 81 for allowing the appeal and setting aside the order of 5 imposition of penalty. Mr. M.G. Bhangde, the learned Senior counsel appearing on behalf of non-applicant no. 2, supported the order passed by the CEGAT, Mumbai on 20.02.2003. The learned Senior counsel then submitted that the MODVAT credit amounting to Rs.26,17,005 was already reversed by the respondent no.2 on its own accord before the issuance of show cause notice and hence, no penalty was imposable under the provisions of Rules 57-I(4) of the Central Excise Rules, 1944. The learned Senior counsel relied on the decisions reported 2003(161)E.L.T. 285 2007(218)E.L.T. 657 (P & H), which in turn, refers to a judgment of the Hon'ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. Versus Commissioner of Central Excise to substantiate the submission. We have perused the order passed by the Commissioner, Central Excise as also the one passed by the CEGAT, Mumbai. We are of the considered view that the prayer made in this reference application need not be granted as the issues involved in the instant case have already been answered by the Hon'ble Supreme Court and by the Punjab & Haryana High Court, which in turn, has referred to the decision of the Supreme Court in the case of Rashtriya Ispat Nigam Ltd. 6 Versus Commissioner. In the case before the Supreme Court, the Appellate Tribunal had held in the impugned order that penalty was not imposable under Section 11 AC of the Central Excise Act, 1944 as well as under Rule 173-Q of the erstwhile Central Excise Rules, 1944 when duty was deposited before the issuance of show cause notice and the Supreme Court had dismissed the appeal filed against the order of Appellate Tribunal. Since the Supreme Court had dismissed the appeal filed by the Revenue and upheld the order of the Appellate Tribunal accepting the proposition that no penalty was imposable, once the duty was deposited before issuance of the show cause notice, the Punjab & Haryana High Court had dismissed the Central Excise Appeals filed by the Revenue. In the instant case also, prior to the issuance of the show cause notice, the MODVAT credit availed by the respondent no.2 was reversed. There was no proposal in the notice to deny MODVAT credit wrongly availed by the respondent on sponge iron, skull scrap and electrolytic grade copper & ship breaking scrap. It was rightly submitted on behalf of the respondent no.2 that for determination of penalty, there should be determination on the credit disallowed and since there was no determination 7 of disallowed credit in this case, the question of imposition of penalty under the provisions of 57- I(4) of the erstwhile Central Central Excise Rules, 1944 did not arise. The applicability of provisions of Rule 57-I(4) was dependent on the determination of the credit disallowed under clause (iii) of sub Rule (1) of Rule 57. The judgments relied on by the learned Senior counsel are helpful to the case of the respondent no.2 and for dismissing the reference application filed by the Commissioner, Central Excise. For the reasons aforesaid, the Central Excise Reference Application is hereby dismissed. JUDGE JUDGE APTE