Full Judgment
2. The facts are not much in dispute. The Officer of the Central Excise at the time of checking on 11-12-98 found shortage of modvatable inputs. The appellants reversed the Modvat credit as detailed in the order-in-original, as the shortage was admitted by Shri Bhushan Goel, Partner of the appellants. However, show cause notice was given to them on 9-7-99 for confirming the duty after expiry of the normal period, by invoking the extended period.
3. So far as liability to reverse the Modvat credit on the inputs found short is concerned, the same has not been contested before me. The learned Counsel has conceded that even though show cause notice was issued after expiry of normal period of limitation, as it was issued on 9-7-99, whereas shortage of inputs came to the knowledge of the department on 11-2-98, the appellants having already reversed the credit which has been appropriated towards the confirmed duty, they do not reserve any right to claim refund of the same. Therefore, the question as to whether the duty demand could be raised by invoking extended period of limitation or not, is not required to be gone into, when appellants have admitted their liability and already reversed the credit.
4. However, penalty in my view under Section 11AC could not be imposed as it is not a case of non-payment or short payment of duty by the appellants so as to attract the provisions of said section. It is a case of only wrong availment of Modvat credit by them for which penal action could be taken under Rule 57(1). But the adjudicating authority has not imposed any penalty under the said rule. Therefore, penalty under Section 11AC is not sustainable.
5. In the light of the discussions made above, the impugned order regarding confirmation of duty by disallowing the Modvat credit, is upheld but in respect of imposition of penalty under Section 11AC, is set aside. Appeal of the appellants accordingly, stands disposed of in these terms.