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4. We have carefully examined the records and heard both sides.
5. Ld. Advocate Shri A.R. Madhav Rao for the appellants submitted that the entire demand was barred by limitation. He submitted that since the Department was aware of the appellants' process of manufacture and of all the facts relevant for the purpose of a demand of duty as raised in the SCN there was no justification for the allegation in the SCN that the appellants had suppression of facts, the extended period of limitation provided under the proviso to Section 11A(1) of the Central Excise Act was not invokable and hence the demand raised in the SCN dated 09.04.97 for the period 1991-92 to 09.07.1996 was barred by limitation. Ld. Counsel also submitted that the appellants had reversed the Modvat credit of Rs.1, 42, 003.06 in their RG-23A Pt.II, long before the issuance of the SCN, on the bona fide belief that the billets captively consumed were exempt from duty under Notification No.217/86-CE. Since the billets were later found to be chargeable to duty, the Modvat credit reversed as above ought to have been accepted by the Department as part of payment of duty on the billets captively consumed. Therefore, the decision of the lower authorities not to reckon the above reversal of Modvat credit as part of payment of duty on the billets cleared for captive consumption during the period of dispute was erroneous. Ld. Counsel, further, submitted that since the entire amount of duty had been paid up before the issuance of the SCN, there was no justification for imposition of any penalty.
6. Ld. JDR Shri Sanjeev Srivastav reiterated the cross-objections as well as the findings of the lower authorities.
7. We have carefully examined the submissions. We find that there is no dispute, at this stage, on the question whether duty of excise was payable on the aluminium billets cleared by the appellants for captive consumption in the manufacture of extruded products. We also note that an amount of Rs. 15,14,245.85 was deposited by the party towards duty of excise on the billets cleared by them for captive consumption in the manufacture of extruded products during the relevant period. Such deposit was made before the issuance of the SCN and the same was not under protest. It was made voluntarily by the party following discovery, by Central Excise officers, of evasion of duty on the billets cleared for captive consumption. Apart form the above deposit, the party had also debited an amount of Rs.1,42,003.06 in their RG-23A Pt.II before the issuance of the SCN. In the facts and circumstances of the case, we have no reason to disbelieve the appellants' submission that the reversal of credit was made on the bona fide belief that the billets captively consumed were exempt under Notification No.217/86. Such reversal of credit was accepted by the Department also. The Department has no case that the inputs on which the credit had originally been taken were not utilised for the manufacture of the billets. It was reversed subsequently by the assessees on the bona fide belief that the billets were exempt from duty. The position subsequently changed when the Department impressed upon the assessees that duty was payable on the billets. The assessees paid such duty also. Therefore, they wee entitled to take Modvat credit of the duty paid on the inputs utilised for the manufacture of the billets. Thus Modvat credit to the extent of Rs.1,42003.06 was available to the assessees and the debit of the said amount in their RG.23 Pt.II must be treated as payment towards duty on the billets.
8. Since the assessees had paid, without protest, the entire amount of duty on the billets captively consumed, by way of deposit of Rs.15,14,245.85 and reversal of credit of Rs.1,42,003.06 before the issuance of the SCN in acknowledgement and acceptance of liability for payment of duty on the goods, their plea of limitation cannot be sustained.
9. IN the context of considering the question of imposability of penalty, we find that the appellants albeit working under SRP, had not filed any declaration under Rule 173B for availing exemption of duty on billets captively used in the manufacture of extruded products meant for use in artificial limbs. They also did not maintain statutory records for such billets and did not issue invoice as required under Rule 52A for clearance of the billets for captive consumption. The omissions/lapses were not satisfactorily explained to the lower authorities, nor are we impressed by the appellants' submissions on the point. We have particularly noted that the appellants' plea that the process of manufacture (starting with the ore and ending with the extrusions) was a continuous process was rightly rejected by the lower authorities and such a plea has not been reiterated before us in the present appeal. That was a plea raised apparently in a desperate attempt to explain the above omissions. Now that the plea stands abandoned the explanation stands reduced to a lame excuse. We would, in these circumstances, hold that the lower authorities were perfectly right in imposing penalty on the appellants under Rule 173Q. The amount of penalty imposed is only Rs. 20,000.00 and the same cannot be considered to be excessive by any standards. We, therefore, uphold the penalty.