2008 (2) TMI 776 - Commissioner - Central Excise

Summary

Issues Involved:
1. Short payment of Central Excise duty.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
3. Applicability of interest on differential duty under Section 11AB of the Central Excise Act, 1944.
4. Determination of value as per Rule 8 of Central Excise (Determination of Value of Excisable Goods) Rules, 2000.

Issue-wise Detailed Analysis:

1. Short Payment of Central Excise Duty:
The respondent, engaged in manufacturing excisable goods, cleared their goods to other units without sale, requiring valuation under Rule 8 of the Central Excise (Determination of Value of Excisable Goods) Rules, 2000. During the period from 1-4-2003 to 4-8-2003, the respondent incorrectly calculated the assessable value at 110% instead of 115% of the cost of production, resulting in a short payment of Rs. 2,27,682/-. The respondent, upon being informed by the department, paid the differential duty and interest before the adjudication.

2. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:
The adjudicating authority refrained from imposing a penalty under Section 11AC and Rule 25 of the Central Excise Rules, 2002, as the respondent paid the differential duty and interest promptly, demonstrating no intention to evade duty. The department contested this decision, citing that the provisions of Section 11AC are explicit and mandate penalty imposition where there is fraud, collusion, mis-statement, suppression of facts, or intent to evade duty. The department relied on case laws including CCE, Indore v. Deepak Spinners Ltd., which held that duty payment upon being caught by the department is not voluntary, thus necessitating penalty imposition.

3. Applicability of Interest on Differential Duty under Section 11AB of the Central Excise Act, 1944:
The respondent contested the payment of interest, citing judgments that in cases of stock transfer where duty is paid before the issuance of a Show Cause Notice, there is no intent to evade duty, and thus, no interest or penalty is applicable. However, the respondent later paid the interest as well.

4. Determination of Value as per Rule 8 of Central Excise (Determination of Value of Excisable Goods) Rules, 2000:
The respondent initially disputed the application of Rule 8, arguing that the conditions were not fulfilled. However, to avoid litigation and maintain good relations with the department, they agreed to the valuation method and paid the differential duty accordingly. The short payment was due to a clerical error in calculating the value at 110% instead of 115%.

Judgment Analysis:
The appeal by the department was rejected based on several grounds:
- The adjudicating authority's decision to not impose a penalty was supported by multiple judgments where it was held that payment of duty and interest before the issuance of a Show Cause Notice negates the imposition of penalty under Section 11AC.
- The respondent's actions were transparent, with all transactions conducted in the presence of the department and regular correspondence regarding valuation and interest payment.
- The short payment was a clerical error without any intent to evade duty.
- The department's reliance on cases involving clandestine removal and compounded levy schemes was deemed inapplicable to the present case.

The adjudicating authority's decision was upheld, confirming that the respondent's actions did not warrant the imposition of a penalty under Section 11AC, and the appeal filed by the department was rejected.