2008 (5) TMI 571 - AT - Central Excise

Penalty - Bona fide belief - job-work - genuine mistake occurred in calculation - manufacture of Storage Tanks

Summary

Issues: Appeal against Order-in-Appeal No. 138/2006 Central Excise - Duty demand on excess clearances - SSI exemption eligibility - Sales tax deduction - Cum duty price calculation - Penalty imposition.

Analysis:
1. Duty Demand on Excess Clearances:
The appellant received raw materials for manufacturing Storage Tanks on job work basis, leading to the clearance of 101 Diesel Storage Tanks without duty payment or following Central Excise procedures. The Revenue demanded duty on the excess clearances exceeding Rs. 1 crore, leading to a demand of Rs. 5,359,549 along with Education Cess and interest. The party paid duty, cess, and interest before the Show Cause Notice was issued. The Commissioner (Appeals) confirmed duty and interest but set aside the penalty, citing payment before the notice. The appellant contended they never exceeded the exemption limit, claiming SSI exemption. They argued for deducting the scrap value from raw material cost, stating a calculation error including scrap charges twice.

2. Sales Tax Deduction and Cum Duty Price Calculation:
The Commissioner (Appeals) found the appellant ineligible for sales tax abatement on raw materials as they had not paid any sales tax. The Commissioner also denied cum duty price benefit, noting the appellant did not sell the finished products but received raw materials, converted them, and transferred them without selling. However, the Commissioner acknowledged the error of including scrap charges twice in the clearances calculation. The Tribunal agreed with this assessment, directing the Original authority to recalculate the duty liability after deducting the scrap value included in job charges.

3. Penalty Imposition:
The Revenue appealed the setting aside of the penalty. The Tribunal upheld the Commissioner (Appeals)' decision, considering the party's genuine misunderstanding about duty liability regarding sales tax and cum duty value. The Tribunal deemed the penalty inappropriate due to the absence of intent to evade duty payment, remanding the case to recompute duty liability and refund any excess amount collected to the party.

In conclusion, the Tribunal upheld the duty and interest but directed the recalculation of duty liability after deducting the scrap value included twice. The penalty was set aside due to a genuine misunderstanding, emphasizing the need for a fair interpretation of duty obligations.