2004 (7) TMI 555 - AT - Central Excise

Summary

Issues involved:
Demand of duty and imposition of penalty on the clearance of levy sale sugar as free sale sugar.

Analysis:
The appeal involved a dispute regarding the demand of duty and penalty imposed on the clearance of levy sale sugar as free sale sugar by M/s. Jind Co-op. Sugar Mills Ltd. The Appellants argued that they had initially cleared sugar as free sale sugar in November 1998 based on an order from the Directorate of Sugar, which later changed to a loan basis. They claimed a refund for the excess duty paid but were rejected by the Asstt. Commissioner. Subsequently, they adjusted the duty by paying the levy sugar rate. The Additional Commissioner confirmed the duty demand and imposed a penalty, which was upheld by the Commissioner (Appeals).

The Appellants contended that they were eligible for a refund as they had paid excess duty initially and had now adjusted the duty at the levy sugar rate. They argued that the duty adjustment did not affect the Government financially as the sugar was cleared under the direction of a Government Ministry. They emphasized that there was no intention to evade duty and hence, no penalty should be imposed.

On the other hand, the Respondent argued that different duty rates applied to levy sugar and free sale sugar. They stated that the Appellants had cleared sugar as free sale sugar but paid duty at the levy sugar rate, necessitating payment of the differential duty. The Respondent highlighted that the arrangement between the Appellants and the Government department did not affect the classification of the sugar for duty purposes.

The Tribunal considered the submissions and noted that the sugar in question was cleared as free sale sugar by the Appellants, falling under a specific sub-heading in the Central Excise Tariff Act. Despite the initial arrangement with the Department of Sugar & Edible Oils, subsequent changes did not alter the duty classification. Citing a Supreme Court case, the Tribunal emphasized that duty liability was determined at the time of removal of goods, regardless of subsequent price changes or directives from the Government. The Tribunal upheld the duty demand but agreed with the Appellants that no penalty was warranted under the circumstances, thus setting aside the penalty imposed.

In conclusion, the Tribunal ruled in favor of the duty demand but revoked the penalty, considering the special circumstances of the case and the absence of intent to evade duty.