2004 (3) TMI 562 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Section 11AC on the appellants for short-payment of central excise duty.

Analysis:
The appellant, a company, filed an appeal against the Order-in-Appeal passed by the Commissioner of Central Excise, Bangalore-I. The main issue under dispute was the imposition of penalty under Section 11AC on the appellants for short-payment of central excise duty. The appellant had a system in place for declaring revised prices and paying the appropriate duty on stock transfers to their depots. However, due to a computer snag, they failed to correctly determine the duty payable for a specific period. The audit party later detected a significant short-payment of duty, which the appellant voluntarily paid. The Department issued a Show Cause Notice demanding the outstanding duty, penalty under Section 11AC, and interest under Section 11AB. The Commissioner (Appeals) reduced the penalty but upheld the rest of the order. The appellant argued that since they voluntarily paid the duty, penalty and interest should not be levied, citing precedents. On the other hand, the Department contended that the voluntary payment did not absolve the appellant from penalty liability, referring to relevant case law.

The Tribunal analyzed the case and observed that the appellant had voluntarily paid a portion of the duty but failed to detect and rectify a larger short-payment until it was pointed out by the audit. The Tribunal differentiated between payments made voluntarily by the assessee without Revenue intervention and payments made after detection by the Revenue. It held that once the Revenue detected the duty shortfall and the appellant paid subsequently, it could not be considered a voluntary payment. The Tribunal acknowledged the steps taken by the appellant to rectify the system and pay the outstanding duty before the Show Cause Notice was issued. Considering the circumstances, the Tribunal reduced the penalty imposed on the appellants to Rs. 2,00,000, taking into account the voluntary payment already made and the corrective actions taken post-audit detection.

In conclusion, the Tribunal found that while the appellant had voluntarily paid a portion of the duty shortfall, the failure to detect and rectify a significant amount until after audit intervention indicated an intention to evade payment. The Tribunal reduced the penalty imposed on the appellants to Rs. 2,00,000, considering the appellant's actions post-audit detection and the voluntary payment made.