2004 (1) TMI 483 - AT - Central Excise

Summary

Issues:
1. Valuation of excisable goods under Chapter 39 of the C.E.T.A. Schedule.
2. Adoption of cost construction method for payment of Central Excise duty.
3. Undervaluation of goods and imposition of penalty.
4. Challenge to penalty before the appellate authority.
5. Allegation of suppression of facts, misstatement, and fraud.
6. Payment of differential duty and delayed payment.

Analysis:

1. The appellants, manufacturers of excisable goods falling under Chapter 39 of the C.E.T.A. Schedule, adopted the cost construction method for valuation of goods from July 2000 to March 2001. The assessable value included notional profit at 6.06% of the cost of production instead of the prescribed 15%. The department detected undervaluation, leading to a demand for the differential duty and a proposed penalty.

2. The original authority confirmed the duty demand and imposed a penalty under Rule 173Q of the Central Excise Rules, 1944. The party appealed to the Commissioner (Appeals), contesting only the penalty, not the duty liability. The Commissioner (Appeals) upheld the penalty challenge, prompting the appeals before the Appellate Tribunal.

3. During the hearing, the appellants' representative argued that no penalty could be sustained as no mens rea was found against the appellants. They cited relevant legal precedents to support their case. The department reiterated the Commissioner (Appeals)'s findings.

4. The Tribunal carefully examined the submissions and found that the show cause notices did not allege suppression of facts, misstatement, or fraud against the party. The appellants promptly paid the differential duty upon realizing their mistake. The Commissioner (Appeals) attributed mala fide intention to the delayed payment, a finding not supported by the show cause notices. Consequently, the Tribunal concluded that the penalty imposition was unfounded and overturned the lower appellate authority's decision.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeals and rejecting the penalty imposed by the original authority. The decision highlighted the lack of factual and legal basis for sustaining the penalty, emphasizing the importance of allegations being within the scope of show cause notices.