CCE Vs. KONE ELEVATORS INDIA LTD.

JUDGEMENT

(1.) THIS appeal has been filed by the Revenue against the order in Appeal No. 159/99 (M.II) dt. 5.11.1999 in which the Commissioner (Appeals) has held that penalty of Rs. 82,132/ - under Rule 571(4) of the Central Excise Rules 1944 is not maintainable although he upheld the order of the lower adjudicating authority insofar as it related to the confirmation of demand of Rs. 29,570/ - under Section 11A(2) of the Central Excise Act 1944; confirmation of demand of Rs. 2,67,972/ - being the duty payable on credit availed inputs cleared by them under Rule 571(2) of the ibid read with proviso to Section 11A(1) of the Act ibid and also imposition of penalty of Rs. 2,000/ - under Rule 173Q and Rs. 4,676/ - under Section 11AC of the Central Excise Act 1944.

(2.) APPEARING on behalf of the Respondents the Ld. Counsel submits that Rule 571(4) cannot be sustained if the credit has been rightly availed at the time of receipt of the inputs and therefore the lower appellate authority rightly interpreted the Rule 571(4) which is applicable only when credit is availed erroneously by way of fraud, misstatement etc. which is supported by the decision of the Tribunal in the case of Seamless Metal Tubes Ltd. v. CCE reported in 2001 137 (ELT) 218 (T). In other words, subject rule would be attracted only when there is patent violation at the very inception of availing the credit when the inputs were received. He further submits that such contingency is totally absent in the case of the Respondents and hence the impugned order is to be sustained. He further submits that Rule 571(4) was not in force during the material time and it was inserted in the statute vide -(NT) dt. 23.7.1996, and cannot have retrospective effect as held in the following decisions.

(3.) HEARD both sides. I am of the considered view that Sub -rule 4 of Rule 571 would be invoked if the credit has been taken wrongly at the initial stage by way of fraud, wilful misstatement etc. Although there is a violation and suppression in the sense that they have transported the inputs on their own internal documents instead of issuing invoice under Rule 57G(2) of the Central Excise Rule 1944 and therefore the lower adjudicating authority has rightly confirmed the demand of duty and penalty under Section 11AC of the Act as well as penalty under Rule 173Q which has been upheld by the Ld. Commissioner (Appeals). This issue has also been settled by Tribunal's co -ordinate Bench, WRB, Mumbai in the case of Seamless Metal Tubes Ltd. v. CC (supra), although the facts were a little different, the duty for wrongly taken Modvat credit was dropped and no penalty was imposed for the same under Rule 571(4) of the rules ibid. I am of the considered opinion that Sub -rule 4 of Rule 571 would be applicable if at the initial stage Modvat credit has been wrongly availed by the manufacturer on forged documents etc. when they received the inputs, later developments could have been found by the departmental officer and do not consider that their case falls under the category of willful misstatement, fraud etc. or other factors specified in Sub -rule 4 of the Rule 571 of the Rule ibid. In view of the above factors and circumstances, I do not find any infirmity in the order passed by the Ld. Commissioner and the same is confirmed and the appeal filed by the Revenue is rejected.