Arvind Chemi Synthetics (P) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
2. both the authorities below have disallowed modvat credit to the extent of rs. 79, 534/- taken by the appellants in february, 1998 on the ground that the inputs had not been received in the factory. a penalty of equal amount has also been imposed on the party under rule 57-i(4) read with rule 173q.3. the appellants reversed the entire credit before issue of the show cause notice and they have no further grievance in relation to the admissibility of the credit. their only grievance in this appeal is regarding the penalty. ld. advocate for the appellants submits that they had no criminal intent in the matter of availing the credit. the inputs could not be received in their factory only because the vehicle transporting the goods was involved in an accident on its way to their factory. in the absence of mens rea, ld. advocate argues, there should not have been any penalty in this case. ld. dr opposes this plea and submits that, once irregular availment of modvat credit is admitted, the assessee has to accept the penal liability also.4. examined the submissions. there is no dispute in relation to the admissibility of the modvat credit. the credit taken by the party was not admissible to them because the inputs were not received in their factory and utilized in the manufacture of final product as required under rule 57a of the central excise rules, 1944. in fact, the credit has been reversed voluntarily. thus the department's allegation that the appellants had irregularly taken the credit has been constructively conceded by the appellants. ld. advocate has relied on the tribunal's decision in dynamatic technologies ltd. v. cce, chennai [2003 (54) rlt 675] wherein it has been held that where the duty amount has been voluntarily paid before issue of the show cause notice no penalty is leviable under section 11ac. in the instant case, i find that the modvat credit in question was reversed voluntarily before issue of the show cause notice. following the cited decision, i vacate the penalty.the appeal is allowed insofar as the imposition of penalty is concerned.

Judgment:
2. Both the authorities below have disallowed Modvat credit to the extent of Rs. 79, 534/- taken by the appellants in February, 1998 on the ground that the inputs had not been received in the factory. A penalty of equal amount has also been imposed on the party under Rule 57-I(4) read with Rule 173Q.3. The appellants reversed the entire credit before issue of the show cause notice and they have no further grievance in relation to the admissibility of the credit. Their only grievance in this appeal is regarding the penalty. Ld. Advocate for the appellants submits that they had no criminal intent in the matter of availing the credit. The inputs could not be received in their factory only because the vehicle transporting the goods was involved in an accident on its way to their factory. In the absence of mens rea, ld. Advocate argues, there should not have been any penalty in this case. Ld. DR opposes this plea and submits that, once irregular availment of Modvat credit is admitted, the assessee has to accept the penal liability also.

4. Examined the submissions. There is no dispute in relation to the admissibility of the Modvat credit. The credit taken by the party was not admissible to them because the inputs were not received in their factory and utilized in the manufacture of final product as required under Rule 57A of the Central Excise Rules, 1944. In fact, the credit has been reversed voluntarily. Thus the department's allegation that the appellants had irregularly taken the credit has been constructively conceded by the appellants. Ld. Advocate has relied on the Tribunal's decision in Dynamatic Technologies Ltd. v. CCE, Chennai [2003 (54) RLT 675] wherein it has been held that where the duty amount has been voluntarily paid before issue of the show cause notice no penalty is leviable under Section 11AC. In the instant case, I find that the Modvat credit in question was reversed voluntarily before issue of the show cause notice. Following the cited decision, I vacate the penalty.

The appeal is allowed insofar as the imposition of penalty is concerned.