2007 (2) TMI 483 - AT - Central Excise

Summary

Issues:
- Appeal against penalty imposed under Section 11AC of Central Excise Act for wrongly availing small scale exemption.
- Eligibility for small scale exemption notification based on previous year's clearances.
- Allegation of suppression of facts with intent to evade payment of duty.
- Interpretation of Section 11AC in the context of fraud, collusion, and suppression of facts.

Analysis:
1. The appeal was filed by the revenue against the impugned order setting aside the penalty imposed under Section 11AC of the Central Excise Act. The revenue contended that the appellant wrongly availed the benefit of small scale exemption, making them liable for the penalty. The appellant had not included the value of clearances returned by customers, leading the revenue to believe they were ineligible for the exemption in the subsequent year due to exceeding the clearance threshold.

2. The appellants, under the small scale exemption notification, paid the duty before the show cause notice was issued. The adjudicating authority confirmed the demand and imposed a penalty under Section 11AC, which was later set aside by the Commissioner (Appeals). The revenue challenged this decision, arguing that the appellant's actions constituted grounds for penalty under Section 11AC.

3. The respondents contended that the penalty under Section 11AC could only be imposed in cases of fraud, collusion, or willful suppression of facts to evade duty payment. They argued that they had duly declared their eligibility for the exemption and filed the necessary returns, indicating their compliance with the notification. As there was no allegation of suppression or misrepresentation in the show cause notice, they believed they were not liable for the penalty.

4. The judgment analyzed the provisions of Section 11AC, emphasizing that penalties apply in cases involving fraud, collusion, or suppression of facts to evade duty payment. In this instance, since the respondents had made the necessary declarations and filings to claim the exemption, there was no evidence of intent to evade duty. Therefore, the impugned order setting aside the penalty under Section 11AC was upheld, and the appeal was dismissed.