- (1.) This appeal filed by the Revenue under Section 35G of the Central, Excise Act, 1944 (for brevity the Act') challenges order dated 3-1-2006 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity the Tribunal') holding that no penalty could be imposed on the assessee respondent. It has been observed that the assessee-respondent had paid duty on 18-2-1999 which is sought to be reversed on the inputs utilised for the manufacture of goods on job work basis. Moreover, there is no finding concluding that the petitioner has committed any fraud or misrepresented or suppressed any facts.
(2.) Brief facts of the case necessary for the disposal of the controversy raised in the appeal are that M/s. Steel Strips Ltd. is engaged in the manufacture of C.R. Steel strips falling under sub-heading 72.11 of the Central Excise Tariff Act, 1985 and is alleged to have contravened the provisions of Rules 57C and 173G of the Central Excise Rules, 1944 (for brevity the Rules') inasmuch as it had not reversed the Modvat credit of Rs. 4,10,296/- for the period commencing from 12-4-1994 to 12-4-1998 on the inputs which were used in the manufacture of finished goods on job work basis as per Rule 57F(4) of the Rules. On 29-9-1998, Anti Evasion staff visited the factory premises of the assessee respondent and found that the factory was not working due to labour problem since 14-4- 1998. One Shri M.P. Singh, General Manager presented all the statutory record concerning Central Excise. The staff physically verified the stock of finished goods as well as of raw material which was found in accordance with the record. However, it was discovered that the assessee-respondent was availing Modvat Credit on different inputs and used the same in the manufacture of C, Steel strips cleared by them on job work basis under Rule 57F(4) of the Rules. According to the provisions of Rule 57C(1), credit of Central Excise duty is not permissible if final product is exempt from whole of duty of excise leviable thereon. In accordance with the Board's circular dated 25-7-1996 credit of duty-paid on common inputs is admissible when used in the manufacture of final product (exempted and dutiable) provided the said credit of duty paid on the inputs going into the exempted category of the final product is debited. The assessee respondent was not maintaining any separate account of use of inputs used in the finished goods manufactured on job work basis. Therefore, it was not admissible to the assessee- respondent and thus recoverable from them under Rule 57-I of the Rules.
(3.) On the basis of the afore-mentioned facts it was considered that the respondent had contravened the provisions of Rules 57C and 173G of the Rules because they had not reversed the modvat credit on the inputs used in the manufacture of those finished goods which were cleared by them on job work basis nor they had submitted statement to the department as required under Board Circular No. 232/66/96/Cus., dated 25-7-1996. The department invoked the provisions of extended period as envisaged by Rule 57-I(ii) of the Rules to initiate action against the assessee-respondent. A show cause notice was issued on 7/9-4-1999 for recovery adjustment of Rs. 4,10,296/- which was considered as inadmissible credit availed by the assessee-respondent in contravention of the provisions of Rule 57C of the Rules. It was also contemplated that penal action be initiated against the assessee respondent under Rules 173Q and 57-I(4) of the Rules. The Adjudicating Authority in its order-in-original came to the conclusion that the assessee respondent was liable to pay the demanded duty of Rs. 4,10,296/- under Section 11A of the Act read with Rule 57-I(ii) of the Rules along with interest as per the provisions of Rule 57(1)(5) of the Rules. Penalty of an amount equivalent to the amount of duty was also imposed.;