ORDER
P.G. Chacko, Member (J)
1. This appeal arises for admission.
2. After examining the records and hearing both sides, I am of the view that the appeal not only merits to be admitted but also requires to be disposed of instantly. After granting waiver of pre-deposit of the interest and penalty amounts involved in this case, I proceed to deal with the appeal.
3. The appellants had taken Modvat credit to the tune of Rs. 5,19,262/- on High Speed Diesel Oil (input) during the period December, 1997 to March, 1998. As is seen from the copy of the RT-12 return available on record, the department by letter dated 4-8-2000 asked the appellants to ‘reverse the credit and, accordingly, the appellants reversed the credit on 28-8-2000. But, at that time, proceedings pursuant to the show cause notice issued by the jurisdictional Supdt. of Central Excise on 7-5-98 was under way. The show cause notice had proposed to recover with interest the amount of duty taken credit of, under the provisions of Rule 57-I as also to impose a penalty on the party under Rules 57-I and 173Q. The proposals had been contested by the party in their reply dated 8-6-98, wherein they had argued that HSD oil was an eligible input covered by the Modvat Scheme. The dispute was ultimately adjudicated upon by the jurisdictional Assistant Commissioner on 31-1-2002. The adjudicating authority confirmed the demand of duty of Rs. 5,19,262/- against the appellants under Rule 57-I, demanded interest on the duty and imposed a penalty of Rs. 50,000/- on them. In the appeal preferred by the party against the order of the original authority, the Commissioner (Appeals) modified the lower authority’s order by reducing the penalty to Rs. 5000/-.
4. In the present appeal filed by the assessee against the order of the lower appellate authority, they rely on the provisions of the Finance Act, 2000 and submit that they had no penal liability in the facts and circumstances of the case. Ld. Counsel for the appellants refers to the provisions of the Finance Act and prays for setting aside the penalty as well as the demand for interest. I have also heard ld. DR.
5. Sub-section (1) of Section 112 of the Finance Act, 2000 placed a bar on availment of Modvat credit on HSD oil for the period 16-3-95 to the date on which the Act received the assent of the President. It is not in dispute that the Finance Act received the Presidential assent on 12-5-2000. The question of admissibility of Modvat credit in respect of HSD oil as input or capital goods during the period December, 1997 to March, 1998, coming within the period covered by Section 112(1) of the Finance Act, stands squarely covered against the appellants by the above provisions. The only surviving questions in this case are in relation to interest and penalty. Clause (b) of Sub-section (2) of Section 112 ibid provided for the recovery of any such credit of duty as barred under Sub-section (1) being made within a period of 30 days from 12-5-2000 and further provided that, in the event of non-payment of such credit of duty within the said period of 30 days, interest shall be recovered @ 24% p.a. from the 31st day till the date of payment. The above provisions clearly mandated the Revenue to demand any wrongly availed Modvat credit amount within 30 days from 12-5-2000. The Revenue did not do so in the instant case. It was only on 4-8-2000 that they called upon the assessee to reverse the wrongly availed Modvat credit. The assessee, admittedly, reversed the credit within a period of 30 days from the date of demand. In view of Clause (b) of Sub-section (2) of Section 112 of the Finance Act, 2000, no interest was liable to be paid by the appellants who reversed the Modvat credit within 30 days from the date of demand. Of course, the position would have been different, if the Revenue had issued a demand within 30 days from 12-5-2000.
6. Explanation to Section 112 of the Finance Act is clear enough. No assessee had any liability to pay penalty on the ground of irregular availment of Modvat credit on HSD oil for the period 16-3-95 to 12-5-2000. In the result, the penalty and the demand for interest on duty are vacated and the appeal is allowed.