(1.) THE facts of the case in brief are that the appellants manufacture communication equipments and parts thereof falling under Chapter sub -heading Nos. 8517.00 and 8529.00. They are also availing the facility of the Modvat credit on the inputs used in the manufacture of their final products. On the visit of the Central Excise Officers to their unit in June, 1997, it was noticed that 8199 meter cables (inputs) on which the Modvat credit of Rs. 13,22,041 / - was taken by the appellants, was destroyed in fire in June, 1995. The visiting officers observed that the appellants had neither informed the department about the said fire and destruction of the inputs material nor had they reversed the Modvat credit availed on it. At the instance of the visiting officers, they debited this amount in their PLA on 4 -8 -97. The proceedings were therefore initiated against the party which culminated in the Joint Commissioner of Central Excise, Chandigarh -I passing an order dated 18 -9 -2000 in which he disallowed the Modvat credit of Rs. 13,22,041/ - to the appellants and ordered the same to be adjusted against the deposit made by the party on 4 -8 -97. He further imposed a penalty of Rs. 13,22,041 / - on them under Rule 57 -I(4) of the Central Excise Rules, 1944 and also directed the recovery of the interest of Rs. 5,75,072/ - under Rule 57 -I(5) of the Central Excise Rules, 1944.
(2.) THE party filed an appeal but the same is rejected by the order dated 21 -8 -2001 of the Commissioner (Appeals), Chandigarh.
(3.) THIS appeal is against the impugned order of the Commissioner (Appeals). We have heard Shri A.R. Madhav Rao, ld. Advocate, for the appellants and Shri Rajeev Tandon, ld. SDR, for the respondents. We have considered the submissions made before us. The facts as stated above are not in dispute. The ld. Counsel for the appellants submits that the appeal is only in respect of the penalty and the interest amounts imposed on the appellants. It is contended that the Modvat credit is correctly taken at the time of receipt of the inputs material. The input material however subsequently got destroyed by the fire accident. It is stated that at the time of receipt, it was certain that the inputs were the ones which would be utilised in or in relation to the manufacture of final products, then the Modvat credit is available for utilization towards payment of duty on the final products. It is stated that at the time of taking of the credit there was no violation of any of the provisions of the Modvat rules and therefore imposition of the penalty equal to the amount of the credit levying interest under the provision of Rule 57 -I(5) of the Central Excise Rules, 1944 is not valid. We have considered these submissions. As already stated above, the appellants are not contesting the recovery of the Modvat credit amount to Rs. 13,22,041/ - in respect of the input material on which this amount of the Modvat credit is taken. This material got destroyed in the fire accident. The recovery of this amount therefore, dated back to June, 1995 when the said input material got destroyed. As rightly contended, a penalty equal to the credit disallowed is liable to be recovered in terms of Rule 57 -I(4) where the credit of duty paid on the inputs has been taken wrongly by reason of fraud, wilful mis -statement, collusion or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with the intent to evade payment of duty. Since in this case, the Modvat credit was not taken wrongly much less on account of the stated reasons, we are of the view that no penalty under the provisions of this rule is liable to be imposed on the appellants. The interest is recoverable under Rule 57 -I(5) if the credit of duty on the inputs has been taken for the same reasons, Therefore, the interest provisions as provided under this sub - rule are not applicable to the facts of the present case. We also find no rebutal in the order of the original authority to the submissions of the appellants that at all times they maintained a credit more than the amount of recovery made from them and therefore there was no loss caused to the Revenue. In view to these facts, we set aside the penalty and the interest imposed on the appellants and allow the appeal.