2007 (1) TMI 477 - AT - Central Excise

Summary

Issues involved:
The judgment involves the imposition of penalties by the Commissioner (Appeals) on the appellant company and its executives for failure to comply with changed Valuation Laws and Rules regarding inter-unit transfers.

Details of the judgment:
The appellant company, with multiple manufacturing units, transferred goods from the Vapi unit to other units on an inter-unit basis. Prior to 1-7-2000, duty was paid using the cost construction method. However, post the change in Valuation Laws, duty became payable by adding a notional profit of 15%. The officers of the company continued to follow the old procedure, leading to an investigation in October 2002 where the mistake was rectified by paying the duty owed.

The appellant's advocate argued that the duty was paid at 115% of the cost of production for both finished goods and inputs transferred, even though the law required only the reversal of credit actually taken for inputs. The appellant company maintained that the duty paid by the Vapi unit was available as credit to the recipient units, making the exercise revenue neutral and indicating no intention to evade duty payment.

After considering the submissions, the Tribunal concluded that there was no intention to evade duty payment, attributing the issue to ignorance of the changes in law. The appellant's willingness to pay higher duty, even on inputs transferred, demonstrated their good faith. Additionally, no specific failure was attributed to the penalized officers of the company. Therefore, the penalties imposed on the company and its executives were deemed unsustainable, and the Commissioner's order was set aside.

As a result, all appeals were allowed, and the penalties imposed by the Commissioner (Appeals) were overturned.