ORDER
S.S. Sekhon, Member (T)
1. The appellants were engaged in the activity of ship breaking and salvaging various items from the same. They were registered with the Central Excise Authorities as Goods and Materials of Chapter 72 of Central Excise Tariff obtained by breaking up of ships, boats and other floating structures were classified under heading 72.30 and were required to pay duty prescribed therein. They were availing credit of CVD paid on old ships imported for breaking up. The credit so availed was used to discharge the duty payable under 72.30. Consequent to the activity undertaken articles other than these falling under Chapter 72 also emerge and they were cleared as non-excisable items.
2.a) A show cause notice dt. 27.10.1995 was served as to why modvat credit of Rs. 19,542/- allegedly availed wrongly should not be recovered under Rule 57I read with Section 11A as the entire amount of CVD paid on the ship imported was availed as credit while various items obtained during breaking up were cleared without payment of any duty. This was followed by identical notices dt. 23.11.1995, dt. NIL and dt. 03.01.1997, dt. 01.04.1997, dt. 11.07.1997. These notices were discharged vide Asst. Commissioner’s order dt. 04.05.1999 following CBEC Circular No. 345/61/97-Cx dt. 23.10.1997.
b) During the same period the preventive officers visited that factory and recovered a had written note book and on 08.10.1996 instructs the appellant – (i) debited Rs. 5 lakhs towards credit wrongly availed on ‘non excisable goods’ (ii) Rs. 92,000/- on ad-hoc basis towards differential duties on sums collected.
Consequent notice was issued on 06.06.2001 for –
(i) Rs. 2,13,229/- to be recovered is duty on clandestine removal of goods and on under valuation.
(ii) Modvat credit of Rs. 2,94,114/- availed on clearance of non-excisable goods to be recovered.
The lower authority confirmed the demands with interest imposed penalties.
c) The Commissioner (Appeals) confirmed-
i) Demand of duty of Rs. 2,13,229/- on merits on clandestine clearance of goods.
ii) Set aside the confirmed amount of Rs. 2,94,114/- demanded under Rule 57I on non-excisable goods. However held the right to claim the refund as barred by limitation.
iii) The order of interest was set aside on transactions prior to 28.09.1996 and set aside the penalty under Section 11AC.
iv) Penalty under Rule 173Q (1) was reduced to Rs. 1,00,000/-
v) Set aside the penalty under Rule 209A on the partner.
Hence this appeal.
3. After hearing both sides and considering the submissions it is found:
a) There is no case on part of the appellants in defending the findings on clandestine removal and consequent duty and penalty liability on arrived at by the Commissioner (Appeals) has to be upheld. The Ld. Advocate for the appellant also did not press the same. The amount of Rs. 2,13,229/- as duty determined stands confirmed.
b) The reversals of the amounts of credits, as made against the clearance of certain non-excisable goods was not required to be made. The reversals therefore are not covered by law. The credit was entitled. The credit if entitled has to be restored, as an accounting exercise, when debits have been got made by the department or by the appellants, are not required or upheld. The Commissioner’s orders in this connection of finding a refund claim as time barred cannot be upheld. There was no appeal on refund before him.
c) Penalty under Rule 173Q(1) in these circumstances is reduced to Rs. 50,000/- from Rs. 1,00,000/-.
d) The appeal is allowed with direction to re-correct the accounting entries, as required under Rule 226,except for the duty demands as made and on payment of penalty of Rs. 50,000/- confirmed under Rule 173Q separately.
4. Appeal partially allowed in above terms.
(Pronounced in Court)