2009 (4) TMI 693 - AT - Central Excise

Summary

Issues:
- Duty liability on Gym Equipments
- Contravention of Central Excise law
- Imposition of penalty under Section 11AC
- Benefit of Cenvat and cum-duty
- Customs Notification exemption
- Bona fide belief of the appellants
- Central Excise Notification No. 6/2002-CX
- Intent to evade duty
- Proviso to Section 11A
- Show cause notice requirement
- Interest under Section 11AB

Duty liability on Gym Equipments:
The appellants, manufacturers of Gym Equipments, failed to discharge duty liability despite clearances exceeding Rs. One Crore in the year 2004-05. Preventive Officers discovered the lapse during a visit to the appellants' unit, leading to the discharge of duty liability by the appellants. The Revenue pursued action against the appellants for contravention of Central Excise law.

Imposition of penalty under Section 11AC:
The Original authority confirmed the demand with interest and imposed an equal penalty under Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) partially allowed the appeal by granting cum-duty benefit and Cenvat but upheld the penalty imposition, citing the appellants' lack of bona fide belief in their exemption claim.

Customs Notification exemption and Bona fide belief:
The appellants argued that a Customs Notification exempted sports goods from full payment of duty, leading them to believe in a similar exemption under Central Excise law. They contended that their belief was genuine, supported by meticulous account-keeping and the existence of Central Excise Notification No. 6/2002-CX, dated 1-3-2002, exempting sports goods from duty.

Intent to evade duty and Proviso to Section 11A:
The Departmental Representative highlighted the detection of duty evasion by Preventive Officers, questioning the appellants' bona fide belief based on the Customs Notification. The appellants countered by emphasizing the Central Excise Notification exempting sports goods and their diligent accounting practices as evidence of their lack of intent to evade duty.

Show cause notice requirement and Interest under Section 11AB:
After careful consideration, the Tribunal found that the appellants held a bona fide belief in the exemption, making the proviso to Section 11A inapplicable. As duty was discharged upon detection of the lapse, the Tribunal ruled that no show cause notice was necessary. Consequently, the imposed penalty was set aside, but interest under Section 11AB was upheld, leading to the appeal being allowed in part.