2004 (12) TMI 199 - AT - Central Excise

Summary

Issues involved: Contesting the setting aside of penalty under Section 11AC by the Revenue.

Summary:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the contestation by the Revenue regarding the setting aside of the penalty imposed on the respondents under Section 11AC. The Commissioner (Appeals) had set aside the penalty while confirming the demand of Rs. 7,02,826/- on the grounds that duty with interest was deposited before the show cause notice was issued.

During the year 1994-95, M/s. Maruti Udyog Ltd. imported moulds and fixtures under the EPCG Scheme and provided them free of cost to the respondents for manufacturing components for motor vehicles. However, M/s. Maruti Udyog Ltd. failed to fulfill the obligations under the EPCG Scheme, leading to re-assessment of bills of entry by customs authorities. The respondents availed Cenvat credit on CVD but did not amortize the differential duties of customs and interest paid by M/s. Maruti Udyog Ltd. due to default in the EPCG Scheme, rendering them ineligible to avail Modvat credit.

The respondents paid the duty with interest before the show cause notice was issued, but it was not a voluntary payment. The Tribunal noted that the payment was made only after the department pointed out the wrongful availing of Modvat credit. Considering the circumstances, the Tribunal opined that a penalty should have been imposed, citing the precedent in the case of CCE v. Machino Montell (I) Ltd. where duty paid voluntarily before the show cause notice exempted penalty imposition, which was not the case here.

Consequently, the Tribunal modified the Commissioner (Appeals) order and imposed a penalty of Rs. 70,000 on the respondents, allowing the appeal of the Revenue.